Difference Between Arbitration and Conciliation

Rashmi Karan
Manager - Co ntent

Updated on Feb 9, 2024 12:11 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.

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.

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Tabular Comparison – Arbitration vs Conciliation

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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.

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 Arbitration Conciliation
Aspects

A method of dispute resolution A method of dispute resolution

where a neutral third party where a neutral third party
Def inition makes a legally binding decision f acilitates negotiations between the
af ter considering the arguments parties to help them reach a
of both parties. mutually acceptable solution.

T he conciliator acts as a mediator

T he arbitrator acts as a
Role of the and f acilitates talks between the
decision-maker and renders a
T hird Party parties but does not make a f inal
f inal and binding decision.
decision.

T he agreement reached through

T he decision reached by the
conciliation is not legally binding
Legal Binding arbitrator is legally binding and
unless the parties voluntarily decide
enf orceable by law.
to f ormalize it into a contract.

T he parties have limited control T he parties have more control over

Process over the arbitration process as the conciliation process as they
Control the arbitrator determines the actively participate in negotiations
rules and procedures. and decide the outcome.

Arbitration is typically an
Conciliation is more collaborative,
Adversarial adversarial process where the
f ocusing on f inding common ground
Nature parties present their case to the
and resolving disputes amicably.
arbitrator.

Conciliation can be quicker as it

Arbitration can be relatively
f osters direct communication
Speed quicker than litigation but may
between the parties to resolve
take several months or years.
ef f iciently.

Applicable in commercial
Applicable in f amily disputes,
disputes, construction
Applicability community conf licts, and
contracts, labor disputes, and
interpersonal conf licts.
international matters.

Parties in arbitration can have

Role of Legal Parties in conciliation may or may
legal representation to present
Representation not have legal representation.
their case.

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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.

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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?

Can the parties control the process of arbitration and conciliation?

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Are arbitration and conciliation suitable f or dif f erent types of disputes?

Which process is quicker: arbitration or conciliation?

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

Which method, arbitration or conciliation, is more adversarial?

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