Difference Between Arbitration and Conciliation

Difference Between Arbitration and Conciliation

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Rashmi
Rashmi Karan
Manager - Content
Updated on Feb 23, 2024 11:38 IST

Understanding the distinctions between arbitration and conciliation is crucial for individuals and organizations seeking effective and tailored dispute resolution strategies. This article will explore the key differences between arbitration and conciliation, exploring their respective roles, outcomes, legal implications, and applicability in various contexts.

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Two commonly employed methods to resolve disputes outside traditional litigation are arbitration and conciliation. While both approaches seek to find resolutions outside the courtroom, they differ significantly in their processes and outcomes. In this blog, we will cover the difference between arbitration and conciliation. 

Tabular Comparison – Arbitration vs Conciliation

Main Difference – Arbitration involves a neutral third party rendering a legally binding decision after considering the arguments of both parties, while conciliation revolves around a mediator facilitating communication and negotiation to help the parties reach a mutually acceptable agreement.


Aspects
Arbitration Conciliation
Definition A method of dispute resolution where a neutral third party makes a legally binding decision after considering the arguments of both parties. A method of dispute resolution where a neutral third party facilitates negotiations between the parties to help them reach a mutually acceptable solution.
Role of the Third Party The arbitrator acts as a decision-maker and renders a final and binding decision. The conciliator acts as a mediator and facilitates talks between the parties but does not make a final decision.
Legal Binding The decision reached by the arbitrator is legally binding and enforceable by law. The agreement reached through conciliation is not legally binding unless the parties voluntarily decide to formalize it into a contract.
Process Control  The parties have limited control over the arbitration process as the arbitrator determines the rules and procedures. The parties have more control over the conciliation process as they actively participate in negotiations and decide the outcome.
Adversarial Nature Arbitration is typically an adversarial process where the parties present their case to the arbitrator. Conciliation is more collaborative, focusing on finding common ground and resolving disputes amicably.
Speed Arbitration can be relatively quicker than litigation but may take several months or years. Conciliation can be quicker as it fosters direct communication between the parties to resolve efficiently.
Applicability Applicable in commercial disputes, construction contracts, labour disputes, and international matters. Applicable in family disputes, community conflicts, and interpersonal conflicts.
Role of Legal Representation Parties in arbitration can have legal representation to present their case. Parties in conciliation may or may not have legal representation.

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What is Arbitration?

Arbitration is a means of conflict resolution through which the parties decide to submit a conflict to the decision of one or more arbitrators, who must be qualified professionals in the subject matter of the conflict, renouncing to go to the ordinary courts and tribunals. The Arbitration and Conciliation Act, 1996 governs the arbitral proceedings in India.

Arbitration offers an alternative to traditional litigation and provides a more efficient and cost-effective means of resolving disputes. It is commonly used in various areas, including commercial contracts, labor disputes, construction disputes, international trade, and consumer matters. The process is governed by arbitration laws and regulations, which vary across jurisdictions.

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What is Conciliation?

Conciliation refers to a voluntary dispute resolution process in which an impartial third party, called a conciliator, assists the parties in reaching a mutually acceptable settlement. It is an alternative to litigation and arbitration to facilitate communication, understanding, and compromise between the disputing parties.

The key objectives of conciliation are to promote understanding, rebuild relationships, and reach a voluntary agreement that satisfies the interests of both parties. The process is typically confidential, allowing the parties to freely express their concerns and explore possible solutions without fear of their statements being used against them later.

Conciliation can be used in various disputes, including family, community, labour-management, and interpersonal disputes. It is a flexible and collaborative approach that empowers the parties to actively participate in the resolution process and retain control over the outcome.

Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 is an Indian legislation that governs the law relating to domestic and international arbitration and conciliation proceedings in India. It encourages arbitration and conciliation as a preferred method of dispute resolution in India. 

The act provides a modern legal framework that aligns with international standards and facilitates the efficient and effective resolution of disputes outside the traditional court system. The act is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. 

The Arbitration and Conciliation Act, 1996, applies to domestic and international arbitrations in India.

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FAQs

Are the decisions reached in arbitration and conciliation legally binding?

Yes, the decision reached in arbitration is legally binding and enforceable by law. However, the agreement reached through conciliation is not inherently legally binding unless the parties voluntarily decide to formalize it into a contract.

Can the parties control the process of arbitration and conciliation?

In arbitration, the parties have limited control over the process as the arbitrator determines the rules and procedures. Conversely, in conciliation, the parties have more control as they actively participate in negotiations and decide the outcome.

Are arbitration and conciliation suitable for different types of disputes?

Arbitration is commonly used in commercial disputes, construction contracts, labour disputes, and international matters. Conciliation, on the other hand, is often employed in family disputes, community conflicts, labour-management disputes, and interpersonal conflicts.

Which process is quicker: arbitration or conciliation?

Arbitration can be relatively quick compared to litigation but may still take several months or years, depending on the complexity of the dispute. Conciliation can be quicker as it aims to foster direct communication and resolve efficiently.

Can the parties appeal the decision made in arbitration and conciliation?

Generally, the decision reached in arbitration is final and binding, with limited avenues for appeal. In conciliation, since the conciliator does not make a final decision, there is no need for an appeal process.

Which method, arbitration or conciliation, is more adversarial?

Arbitration is typically more adversarial, resembling a formalized legal process where parties present their case to the arbitrator. Conversely, conciliation is more collaborative and focuses on finding common ground and resolving disputes amicably.

About the Author
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Rashmi Karan
Manager - Content

Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio