Akshara Rajesh, a Student of CMR University School of Legal Studies has written the article “Difference between Arbitration, Mediation and Conciliation”
Introduction
“The courts of this country should not be the places where resolution of disputes begins. They should be the places where the disputes end after alternative methods of resolving disputes have been considered and tried – Sandra Day O’Connor”[1]
“Justice delayed is justice denied – This is a very important phrase in the legal world that expounds on the importance of speedy disposal of cases and disputes. Everyone wants justice delivered quickly and affordably, however, the number of cases to be disposed of is on the rise and it is becoming a task for the judiciary to dispense of the cases. The traditional method of resolving disputes, which is through litigation, is a long-drawn procedure that impedes the administration of justice and overburdens the judicial system. Hence, there is a need for an alternative mechanism that can decrease this challenge faced by the judicial systems globally.
Alternate dispute resolution, as the name connotes, refers to methods other than litigation that is applied in order to resolve a dispute outside the boundaries of the courts. The alternate dispute mechanisms are very important, especially in countries like India, where the courts are clogged with a number of cases. While the Indian judiciary is known for its efficiency, there is still a large number of cases that are yet to be resolved. Thus, the ADR mechanism proves to be very helpful and ensures efficacy in the speedy redressal of grievances or disputes. They involve resolving disputes outside the traditional court systems.
The definitions of ADR by scholars are as follows:
- William B Stallings: “ADR includes all processes and techniques that are used to resolve disputes without resorting to litigation in a court of law.”[2]
- Frank E. A. Sander: “ADR is a voluntary and consensual process in which a neutral third party helps parties to reach a mutually acceptable settlement.”[3]
- Janet K. Martindale and Michael J. Rich: “ADR is a series of techniques, such as mediation, arbitration, and negotiation, used to settle disputes without resorting to litigation.”[4]
- “ADR is a process of resolving disputes through the use of negotiation, mediation, arbitration, or other voluntary means, as an alternative to traditional litigation.”[5]
Alternate Dispute Resolution Includes
The alternate dispute resolutions include different types of mechanisms that can be employed depending upon the nature and subjectivity of the issue. They include:
Mediation
A process where a mediator, who is an impartial third party, facilitates the party’s negotiation of a voluntary settlement. Instead of imposing a conclusion or finding a resolution for the parties, the mediator aids them to communicate and negotiate.
Arbitration
The process of arbitration involves the selection of an impartial third party (the arbitrator) to hear the evidence and render a judgment in a dispute. The arbitrator’s ruling is typically enforceable in court and binding on the parties.
Conciliation
A procedure in which the conciliator, a neutral third party, helps the parties negotiate a peaceful settlement. The conciliator may make recommendations or suggest solutions, but they are not able to resolve disputes.
Negotiation
Through the process of negotiation, the parties themselves try to resolve their disagreement. One can carry out this either with or without a third party’s help.
Collaborative laws
These include collaboration between the party’s legal representatives in order to resolve a dispute without going to court is known as collaborative law. The parties concur to communicate openly and exchange data in order to speed up settlement.
Arbitration and Conciliation Act 1996
The laws concerning arbitration and conciliation are governed to an extent by the Act of 1996. The Arbitration and Conciliation Act of 1996 came as an effort to nullify the drawbacks of the Arbitration Act of 1940. There were several laws before 1996 that governed the nature of arbitration. However, the act of 1940 initiated a series of drawbacks and was considered ineffective. In response to it, the Arbitration and Conciliation Act 1996 was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985. Thus, the Act of 1940 and other acts before were repealed. The act focuses on three arenas:
- domestic and international arbitration
- enforcement of awards
- conciliation
The central aim of the act was to curtail delays in the process of resolving disputes, the inclusion of international domains, and lastly, dwindling the supervisory role of the courts. It further ensured that these arbitration agreements provided for impartial, free, and fair conduct of rules. Also, the act ensures that the arbitral awards will be rendered similarly to the provisions of the court. The act is divided into four parts and seven schedules, the first part deals with arbitration and consists of ten chapters. The second part deals with the enforcement of certain foreign awards with two chapters. The third part consists of sections that focus on conciliation while Part IV talks about supplementary provisions. Thus, arbitration and conciliation in India are effectively regulated.
Difference Between Arbitration, Conciliation, and Mediation
Arbitration
Arbitration is a form of alternative dispute resolution, where disputes can be resolved outside the ambit of a courtroom. It is a written agreement entered by the parties of a contract to resolve or refer to any dispute that might arise or has arisen, in reference to the contract, to an impartial third party called the arbitrator. The agreement thus entered upon is called the arbitration agreement and it must be a result of consent between the parties. The objective of such a provision is to:
- Ensure a speedy resolution of their dispute
- Provide for an impartial arbitrator agreed upon by both the parties
Arbitration determines an idea of freedom acquiescent to law. It is consensual and more or less a confidential procedure. In such a process, the arbitrator will decide the arbitration award, which may or may not be binding depending upon the nature of the agreement entered upon. An arbitration award is a financial or non-financial award rendered by the arbitrator to the contending parties.
An arbitration can be a separate agreement or a clause within the contract. There are several features and characteristics of an arbitration agreement or clause. For example, it must include the place or address of parties, the number of arbitrators etc. One important feature is to mention of the law governing the arbitration agreement. This is essential in an international agreement. Thus, we identify that different countries have their own arbitration laws with unique principles. For example, in the U.S.A., the guiding principle of arbitration was that of freedom of contract while France represented the most liberal arbitration act. The Arbitration and Conciliation Act of 1996 governs arbitration agreements in India.
Indian Oil Corporation Ltd. v. NCC Ltd[6]
In the case, the honorable court while deciding upon a certain order passed under section 11 of the 1996 act, discussed party autonomy in arbitration. The court provided a few areas where parties to the arbitration are free to agree on the applicability of[7]:
- “Proper law of the underlying contract
- proper law of the arbitration agreement
- proper law for conducting the arbitration”[8]
Mutha Construction v. Strategic Brand Solutions Pvt. Ltd[9]
The National Company Law Tribunal (NCLT) in India heard the concerned case in 2017. The case was regarding a disagreement between the branding and commercial firm Strategic Brand Solutions (I) Pvt. Ltd. and the construction company Mutha Construction. The issue originated because Strategic Brand Solutions owed Mutha Construction money for services provided. The parties decided to pursue mediation under the Indian Arbitration and Conciliation Act, of 1996 after repeated unsuccessful attempts to resolve the dispute through negotiation.
The parties were successful in settling their dispute and reaching a solution during the mediation process. The settlement deal was then contested by Mutha Construction in court, though, on the grounds that it had been forced into accepting the terms. The settlement agreement was ultimately upheld by the NCLT because there was no proof of coercion or improper influence. The tribunal stressed the value of ADR techniques like arbitration, mediation, and conciliation in promptly and effectively resolving disputes and urged parties to consider these alternatives before turning to litigation.
Mediation
Mediation is a process where a mediator, who is an impartial third party, facilitates the parties negotiation of a voluntary settlement. Instead of imposing a conclusion or finding a resolution for the parties, the mediator aids them to communicate and negotiate. It is a simple and most acknowledged form of alternative dispute resolution. Here, the negotiations and communications happen at the will of the parties and the mediator serves only as a medium to facilitate the parties to reach an agreement. According to American Bar Association, “Mediation is a process in which a neutral third party assists the disputing parties in reaching a mutually acceptable resolution of their dispute.”[10]
In India, Mediation is the most acknowledged form of ADR and it was first recognized under the Industrial Dispute Act, of 1947.[11] In support of this, the judiciary also created a “National Plan for Mediated Settlement of Dispute” to promote mediation by organizing training programs for mediators, creating manuals for mediators, putting up mediation centers in court complexes, and educating litigants about mediation. The Rajya Sabha has introduced the Mediation Bill of 2021, which proposes a consolidated plan for the purpose of mediation in India.
Perry Kansagra v. Smriti Madan Kansagra[12]
The court stated that the principle of confidentiality founded the process of mediation[13]. In comparison to traditional adjudicative procedures, mediation occupies a fundamentally different position. The goal of mediation was to settle a problem amicably rather than in an adversarial manner, as opposed to an adversarial stance in adjudicatory processes.
Gurudath K. v. State of Karnataka[14]
The court stated, “Even if the offenses are non-compoundable if they relate to matrimonial disputes and the Court is satisfied that the parties have settled the same amicably … Section 320 CrPC would not be a bar to the exercise of the power of quashing of FIR or criminal complaint in respect of such offenses.”[15] Here, the intention of the court was to settle the matrimonial dispute through mediation.
Conciliation
Conciliation is similar to arbitration; however, it is less formal and procedural in nature. It is a process in which the conciliator, a neutral third party, helps the parties negotiate a peaceful settlement. The conciliator may make recommendations or suggest solutions, but they are not able to resolve disputes. According to the UNCITRAL Model on International Commercial Conciliation (2002), “conciliation” means a process, whether referred to by the expression conciliation, mediation, or an expression of similar import, whereby parties request a third person or persons (“the conciliator”) to assist them in their attempt to reach an amicable settlement of their dispute arising out of or relating to a contractual or other legal relationship. The conciliator does not have the authority to impose upon the parties a solution to the dispute.”[16] In India, the laws concerning conciliation are governed by the Arbitration and Conciliation Act, of 1996.
Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd.[17]
In this case, the Supreme Court of India held that once parties have reached a settlement through conciliation, they cannot withdraw from it unilaterally or challenge its validity in a court of law.
Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleum[18]
In this case, the Supreme Court emphasized the importance of the conciliation process in resolving disputes between parties and held that once a settlement has been reached through conciliation, it is binding on the parties and enforceable like a decree of a court.
State of Maharashtra v. Jalgaon Municipal Council (2010)[19]
In this case, the Supreme Court held that conciliation is a preferred method for resolving disputes between parties, and should be encouraged by the courts as a means of reducing litigation.
Difference Explained in Tabular Form
| SL NO. | NATURE | ARBITRATION | CONCILIATION | MEDIATION |
| 1. | NATURE OF PROCESS | Formal | Less Formal | Informal |
| 2. | IMPARTIAL THIRD PARTY | Arbitrator | Conciliator | Mediator |
| 3. | ENFORCEMENT | The mediator serves only to enable communication between the parties. | The Conciliator cannot enforce his decision. | Binding decision is made by the arbitrator. |
| 4. | OUTCOME | The Arbitration and conciliation act, 1996 | Voluntary and non-binding agreement between the parties. | Voluntary and non-binding parties between the parties. |
| 5. | CONTROL OVER OUTCOME | Parties have no control over the outcome and must accept the decision made by the arbitrator. | Parties have control over the outcome and may accept or reject any proposed settlement. | Parties have control over the outcome and may accept or reject any proposed settlement. |
| 6. | LEGALITY | Legally binding and enforceable, like a decree of court. | Not legally binding, but parties may choose to make it enforceable through a separate legal agreement. | Not legally binding, but parties may choose to make it enforceable through a separate legal agreement. |
| 7. | PRIOR AGREEMENT | Required | Not Required | Not Required |
| 8. | REGULATED BY | Legally binding and enforceable, like a decree of a court. | The Arbitration and conciliation act, 1996 | Code of civil procedure, 1908 |
References
[1] PICTUREQUOTE http://www.picturequotes.com/the-courts-of-this-country-should-not-be-the-places-where-resolution-of-disputes-begins-they-should-quote-727481 (Last visited 31st MARCH 2023).
[2] William B. Stallings, Business and Society: A Reader in the History, Sociology, and Ethics of Business.
[3] FRANK E A SANDER, “Varieties of Dispute Processing,” in The Pound Conference: Perspectives on Justice in the Future.
[4] Janet K. Martindale and Michael J. Rich, “Alternatives to Traditional Litigation: The Pros and Cons of ADR,” Journal of Accountancy.
[5] American Bar Association, “Section of Dispute Resolution,” Definitions.
[6] Indian Oil Corporation Ltd. v. NCC Ltd., 2022 SCC Online SC 896.
[7] LIVELAW https://www.livelaw.in/law-firms/law-firm-articles-/landmark-judgments-arbiitration-arbitral-award-supreme-court-indian-oil-corporation-ltd-trinity-chambers-217271#_ftnref1 (Last visited 1/03/2023).
[8] LIVELAW https://www.livelaw.in/law-firms/law-firm-articles-/landmark-judgments-arbiitration-arbitral-award-supreme-court-indian-oil-corporation-ltd-trinity-chambers-217271#_ftnref1 (Last visited 1/03/2023).
[9] Mutha Construction v. Strategic Brand Solutions (I) Pvt. Ltd., SLP(C) 1105 of 2022.
[10] American Bar Association, “Section of Dispute Resolution,” Definitions.
[11] INDUSTRIAL DISPUTE ACT 1947, No. 14, Act of Parliament, 1947 [INDIA].
[12] Perry Kansagra v. Smriti Madan Kansagra, Civil Appeal No. 1694 of 2019 SLP(C)No.9267 of 2018.
[13] Perry Kansagra v. Smriti Madan Kansagra, Civil Appeal No. 1694 of 2019 SLP(C)No.9267 of 2018.
[14] Gurudath K. v. State of Karnataka, Criminal Petition No. 7258 of 2014, order dated 20-11-2014.
[15] Gurudath K. v. State of Karnataka, Criminal Petition No. 7258 of 2014, order dated 20-11-2014.
[16] UNCITRAL Model on International Commercial Conciliation (2002), Official Records of the General Assembly, 57th session, supplement 17 (A/57/17) (ISBN 0119891646).
[17] Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd. (2009) 8 SCC 520.
[18] Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums (2003) 6 SCC 503.
[19] State of Maharashtra v. Jalgaon Municipal Council (2010) 7 SCC 789.
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