This article has been written by Manaswini Vakulabharanam, a student studying BA.LL.B from Pendekanti law college, Hyderabad. The author is a second-year student.
Disputes happen frequently between the parties in the world of business. And in today’s fast growing commercial world, time is no less valuable than money. No one is opting to go with the slow paced litigation process and is rather choosing the Alternative dispute redressal mechanism as an alternative. The Alternative dispute redressal mechanism signifies any out of court settlements which the disputed parties opt to solve their disputes. Arbitration, conciliation, mediation and negotiation are the most common methods of Alternative Dispute Mechanism. When the courts are understaffed and overburdened then the ADR serves the purpose of dispute resolution.
Arbitration
Arbitration is a procedure in which a dispute is submitted by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. Arbitration is a private dispute resolution procedure instead of going to court. Arbitration is an out of court settlement of disputes by one or more persons who are appointed as arbitrators by both parties. The term Arbitration is explained under the section 2(1)(a) of the Arbitration and conciliation Act, 1996 “Arbitration means any arbitration whether or not administered by permanent arbitral institution”. In other words, any form of arbitration irrespective of its nature has been recognized statutorily in India by bringing such arbitration under the scope of the arbitration and conciliation act, 1996. The Arbitrations are usually private and are don’t have any public records. The arbitral award is binding on the parties just like a court’s decree or order.
There are various types of arbitration depending upon the nationality of the parties, the award or the arbitrators involved:
- Ad hoc arbitration: Ad hoc arbitration is the type of arbitration where the parties mutually agree to resolve their disputes by arbitration proceedings conducted by mutually appointed arbitrators but not by an institution. This is one of the most common forms of arbitration in India.
- Institutional arbitration: Institutional arbitration is the form of arbitration where an institute which has been set up for the purpose of settling disputes by arbitration. Such institutes may be national or international in character and they usually lay down their own rules of arbitration. But such rules cannot override the provisions of The arbitration and conciliation act, 1996.
- Domestic arbitration: When the arbitration takes place in one jurisdiction and both the parties come under that jurisdiction, then such arbitration is called domestic arbitration.
- International arbitration: International arbitration is the type of arbitration where at least one of the parties at dispute is a foreign national or in the case of a body corporate, has been incorporated in a foreign country.
- Emergency arbitration: Emergency arbitration is a form of arbitration where interim relief is given by the arbitral tribunal to a party who wants to protect their assets and evidence from being otherwise lost or altered.
Conciliation
Conciliation is mentioned under ‘The Arbitration and Conciliation act, 1996’. The term conciliation is not defined in the Act. However, simply put conciliation is a confidential, voluntary and private dispute resolution process in which a neutral person helps the parties to reach a negotiated settlement. This method provides the disputing parties with an opportunity to explore options aided by an objective third party to exhaustively determine if a settlement is possible. Like arbitration, the Act covers both domestic and international disputes in the context of conciliation. International conciliation is confined only to disputes of commercial nature. As per the Act, the definition of international commercial conciliation is exactly similar to that of international commercial arbitration. Accordingly, the Act defines international commercial conciliation as conciliation proceedings relating to a dispute between two or more parties where at least one of them is a foreign party. The foreign party may be an individual who is foreign national, a company incorporated outside India, or the government of a foreign country.
In Conciliation, the conciliators are trained and qualified neutral person who help the conflicting parties to make them understand the issues in dispute and their interest to reach mutually accepted agreements. The conciliation process includes the discussion between the parties which is made with the participation of the conciliator. It covers many disputes like industrial disputes, marriage disputes, family disputes etc. This allows the parties to control the output of their dispute. The result is also likely to be satisfactory.
There are two types of conciliations:
- Voluntary conciliation: This kind of conciliation is used commonly when the
disputed parties want to voluntarily participate in the settlement of their disputes.
- Compulsory conciliation: This kind of conciliation is used when the parties don’t
want to voluntarily settle their dispute or they don’t want to come face to face to each
other, this kind of conciliation is usually used in labor cases.
Difference between Arbitration and Conciliation
| Point of comparison | Arbitration | Conciliation |
| Meaning | Arbitration is like a court procedure because the parties submit evidence similar to a trial where the third party hear the entire situation and give his decision which is binding upon the parties. | Conciliation is an alternative dispute redressal method in which an expert is appointed to resolve the disputes by convincing the parties to agree upon an agreement. |
| Enforceability of decision | The decision made by the arbitrator is binding on the parties as is a courts’ decision or decree. | The Conciliator has no right to enforce his decisions. |
| Nature of process | Arbitration is a formal process and follows similar procedure as court proceedings where witnesses can be called and evidence can be presented in respective cases. | It is an informal process and usually involves a discussion on table. |
| Prior agreement | Prior agreement is required. | No need of prior agreement. |
| Availability | Available for existing and future dispute. | Available for existing dispute. |
| Outcome | Arbitral award is final and binding upon parties. | Conciliation does not always ensure that a mutually agreed result will arise between the parties. |
The procedures and techniques are the most commonly used methods of ADR. These methods are hassle free, time efficient and are affordable.
References:
https://www.wipo.int/amc/en/arbitration/what-is-arb.html
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