ADR- Arbitration vs Conciliation vs Mediation And their Differences, Advantages

 

Synopsis

1. Introduction
2. Arbitration

III. Mediation

1. Conciliation
2. Arbitration vs. Mediation
3. Arbitration vs. Conciliation

VII. Mediation vs. Conciliation

1. Introduction

Litigation refers to the proceedings initiated by one or more parties against one or more parties before a court of law for the enforcement of any legal right or obtaining compensation for some wrong. In criminal cases, generally, the government is the prosecuting party seeking to get the criminal punished in accordance with the prescribed law. Litigation is not only expensive and time-consuming but also emotionally draining and unpredictable.

In countries like India where legal battles stretch over several years taking up a lot of time, energy and money of the parties involved, alternative dispute resolution (ADR) has slowly emerged as a preferred mode of resolving legal disputes in comparison to litigation. There are mainly three recognized modes of ADR namely- arbitration, conciliation, and mediation.

This article briefly discusses the concept of arbitration, conciliation and mediation, their advantages over litigation and their comparative advantages and differences with each other.

1. Arbitration

Arbitration is a form of dispute resolution where the parties avoid the traditional process of litigation and get their legal dispute resolved by a neutral third party called the arbitrator. Both sides may mutually appoint one person as arbitrator or may appoint one arbitrator each who then appoint another person as the third arbitrator. In India, arbitration is statutorily recognized and regulated by the Arbitration and Conciliation Act, 1996 (Arbitration Act). The decision given by the arbitrator is known as arbitration award which is made legally binding on the concerned parties by some statutory enactment such as, in case of India, the Arbitration Act.

Arbitration is commonly preferred in case of commercial disputes arising out of a contract in which the parties mutually incorporate an arbitration clause stating that any future disputes arising between the parties shall be settled through arbitration. The arbitration clause also specifies the manner of appointment of arbitrator, the place of arbitration and the language to be used in the arbitration proceedings.

The increasing popularity of arbitration is evident from the following advantages which it has over litigation:

• arbitrators are generally appointed based on their knowledge and skill in a particular field so they have the necessary expertise required to adjudicate technical matters/issues arising between the parties which a judge presiding over a court of law may not always have;
• arbitration is quicker and more cost effective than litigation;
• arbitration takes into account the convenience of the parties who are free to choose the arbitrator and the venue and time of the arbitration proceedings;
• confidentiality of the parties is maintained in arbitration proceedings by avoiding unnecessary publicity;
• arbitration is more flexible in comparison to traditional courts as arbitrators are not bound by strict procedural rules and regulations which are applicable in court proceedings.

III. Mediation

Mediation is an out-of-court settlement process where a neutral third person, called the mediator, supervises and facilitates dialogue between the parties to help them arrive at a mutually acceptable solution to their dispute. Mediation may be voluntary or court ordered. Sometimes, during adjudication of a dispute, if the Indian courts find that the parties are willing to resolve the dispute by dialogue, they refer the parties to undergo mediation while putting the court proceedings on hold. Such mediation is conducted by mediators attached to the concerned court itself. If the parties reach a settlement during mediation, the dispute stands resolved in terms of such settlement putting the court proceedings to an end but if the mediation fails, the court resumes the adjudication of the dispute.

Mediation is a very informal process compared to arbitration and litigation where the parties themselves do the talking instead of their lawyers. Both sides present their case to the mediator who can then put the issues in a proper perspective and encourage parties to arrive at possible solutions while keeping the other side’s interests in mind. The result of mediation proceedings may not always be binding upon the parties unless the mediation process was undergone pursuant to a court’s direction. Mediation serves as an important tool for reduction of the huge backlog of cases pending before Indian courts.

Mediation offers the following advantages over litigation:

• it offers a more relaxed and informal atmosphere to the parties where they can freely and confidentially present their position before the mediator;
• mediation is more flexible as the parties can withdraw at any time from the mediation proceedings if they feel that they are not comfortable mediating further or if they do not seem to be able to reach a consensus with the other party;
• mediation is much quicker than litigation as the parties may reach a settlement only within a few mediation sessions;
• mediation is much more cost effective than litigation and economically fair as both parties equally share the mediation fee payable to the mediator;
• mediation proceedings including court ordered mediations are not bound by strict rules and regulations which apply to court proceedings.

 

1. Conciliation

 

Conciliation is an out of court settlement process where the parties try to get the dispute settled through involvement of a neutral third party called the conciliator. Conciliation is a voluntary process whereby the conciliator assists the parties in negotiating and arriving at a mutually acceptable solution to their dispute. Both sides present their case to the conciliator, through written submissions or otherwise, who thereafter assists the parties in arriving at a settlement and towards this end, may make proposals for settlement of the dispute. If a settlement is reached, the conciliator gives his/her decision in terms of the settlement arrived at between the parties and the decision is not binding on the parties unless they voluntarily choose to abide by it. Conciliation is very similar to mediation.

 

In India, conciliation is statutorily recognized as a method of ADR under the Arbitration Act. Part III of the Act contains detailed provisions on the conduct of conciliatory proceedings between parties who have agreed upon to be governed by the Act in this regard. Section 67 of the Arbitration Act requires the conciliator chosen by the parties to “assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute“. It also permits the conciliator to make written or oral proposals for settlement of the dispute at any stage of the conciliation proceedings.

 

Conciliation offers the same advantages over litigation which are associated with mediation.

 

1. Arbitration vs. Mediation

 

The similarities and differences between arbitration and mediation are as follows:

 

S.No.	Arbitration	Mediation
1)	It can be voluntary or court ordered. Section 8 of the Arbitration Act allows Indian courts to refer disputes brought before them to arbitration if there is a valid agreement existing between the concerned parties to settle the dispute by arbitration.	It can also be voluntary or court ordered.
2)	It replaces court proceedings/trial as parties are precluded from approaching the courts if they have earlier agreed to resolve any disputes arising between them by arbitration	In case of a court directed mediation, trial is only put on hold pending outcome of the mediation proceedings but is not replaced. In other cases, mediation replaces court proceedings if the parties voluntarily choose to mediate before approaching a court of law
3)	It may consist of one or more arbitrators	It generally consists of only one mediator
4)	Arbitrator’s role is to render a decision on the dispute	Mediator does not pass his/her own decision but only records the terms of settlement, if any, reached between the parties
5)	Arbitration proceedings end when the arbitrator passes the arbitration award	Mediation proceedings end when a settlement is reached or parties reach an  impasse

 

In terms of comparative benefits, mediation appears to be a more favourable alternative than arbitration as it is more informal in nature and offers a more relaxed atmosphere to the parties in comparison to arbitration wherein the same hostility may be exhibited by both parties as in the case of litigation. Mediation is also much quicker than arbitration as parties may reach a settlement in few sessions of mediation whereas it often takes several hearings before the arbitrator is in a position to pass an arbitration award.

 

Since mediation is voluntary, the parties are more likely to abide by the settlement reached between them. On the other hand, in case of arbitration, the unsuccessful party is often unwilling to abide by the arbitration award and challenges the award before a court of law to get the award set aside. If the unsuccessful party does not comply with the arbitration award, the successful party has to initiate separate legal proceedings before a court of law to get the award enforced/executed. In such cases where the arbitration gives rise to litigation in form of an appeal/execution proceedings, the original purpose for choosing arbitration over litigation stands defeated.

 

1. Arbitration vs. Conciliation

 

The differences between arbitration and conciliation are as follows:

 

S.No.	Arbitration	Conciliation
1)	Arbitration involves passing of a decision by the arbitrator.	Conciliation involves resolution of disputes with the assistance of the conciliator who helps the parties reach a negotiated settlement.
2)	A prior agreement between the parties to resort to arbitration is required to initiate arbitration proceedings	No prior agreement to conciliate is required
3)	An arbitration agreement may cover existing as well as future disputes	A conciliation process covers only existing disputes

 

In terms of comparative benefits, conciliation appears to be a more favourable alternative than arbitration for the same reasons as in case of choosing mediation over arbitration. It is more informal in nature and offers a more relaxed atmosphere to the parties in comparison to arbitration. While conciliation may require only a few sessions for the parties to reach a settlement, it often takes several hearings before the arbitrator is in a position to pass an arbitration award. Since conciliation, like mediation, is also voluntary, there are again increased chances that the parties shall abide by the settlement reached between them while in case of arbitration, the unsuccessful party often challenges the arbitration award giving rise to appellate proceedings before a court of law.

 

While arbitration is voluntary in the sense of making a choice to resort to arbitration instead of litigation, it is not voluntary in the real sense because the defaulting party often has to be compelled, by issuance of a notice or otherwise, to come before the arbitral tribunal to submit its reply to the allegations/claims raised by the claimant party. On the other hand, in conciliation, the parties willingly come to the table to discuss possibilities of settlement.

 

VII. Mediation vs. Conciliation

 

While mediation and conciliation are quite similar and are generally considered to be synonymous, the differences between mediation and conciliation are as follows:

 

S.No.	Mediation	Conciliation
1)	Mediation is more formal than conciliation as it involves a structured process consisting of various stages namely, introduction, joint session and caucus.	Conciliation does not usually follow any structured process and progresses like a traditional negotiation
2)	Mediation is resorted to when a dispute has already arisen between the parties	Conciliation is usually resorted to as a preventive step to prevent a substantial conflict from developing between the parties after a misunderstanding has arisen
3)	Mediators may not have the power to suggest proposals for settlement and act as mere facilitators of dialogue between the parties	The powers of a conciliator are wider than that of a mediator as they can suggest proposals for settlement which is permitted under section 67 of the Arbitration Act

 

In terms of comparative benefits, conciliation appears to be more beneficial than mediation because it can prove to be more fruitful if it is employed as a prevent measure to prevent small misunderstandings from developing into bigger substantial conflicts. In this sense, conciliation will always precede arbitration and mediation. Since mediation is resorted to only when disputes have already arisen, chances of a settlement being arrived at shall always be more in case of conciliation than mediation. Further, since conciliators are also allowed to suggest proposals for settlement unlike mediators, this is another reason why conciliation has a greater chance of producing favorable results compared to mediation. Considering that conciliation is resorted as a preventive measure, it is likely to require to involve a lesser number of sessions compared to mediation thereby being more cost-effective compared to mediation.