1.

Difference Between Arbitration, Mediation, and Conciliation

Disputes are common in business, contracts, employment, family relations, and even between
governments. Courts are often overloaded with cases, which is why Alternative Dispute
Resolution (ADR) methods are used to save time, money, and relationships.

The three most important ADR methods are:

• Arbitration

• Mediation

• Conciliation

While all three aim to settle disputes outside the court, they differ in process, role of the third
party, and final outcome.

Comparative Table: Arbitration vs Mediation vs Conciliation

Point of
Arbitration Mediation Conciliation
Difference

A process where
A process where a
disputes are A process where a neutral
neutral conciliator
decided by an mediator helps parties talk,
actively helps parties by
Definition arbitrator (like a understand each other, and
suggesting solutions
private judge) find a mutually acceptable
and guiding them
whose decision is solution.
towards settlement.
binding.

Advisory/Facilitative –
Adjudicatory –
Facilitative – mediator conciliator suggests
the arbitrator
Nature of Process facilitates discussion but possible solutions but
gives a binding
does not give decisions. parties decide whether
award.
to accept.

Arbitrator acts like Mediator acts like a Conciliator acts like a

Role of Third Party
a private judge. facilitator/communicator. guide/advisor.

Award is binding
Settlement is voluntary and Settlement agreement is
on both parties,
Binding Nature binding only if both parties binding once signed by
similar to a court
agree. both parties.
decree.

Parties control the

Control over Arbitrator controls outcome, but
Parties control the outcome.
Outcome the decision. conciliator suggests
solutions.
Point of
Arbitration Mediation Conciliation
Difference

Formal and
legalistic, Less formal than
governed by the Informal, flexible, based on arbitration but more
Formality
Arbitration and dialogue. structured than
Conciliation Act, mediation.
1996 (in India).

Proceedings are
Process is confidential;
private, but award
Entire process is settlement remains
Confidentiality may become
confidential. private unless parties
public if enforced
disclose.
in court.

Like a mini-court:
Joint sessions, private
evidence, Open discussions, private
Procedure meetings, and
witnesses, meetings, negotiation.
conciliator’s proposals.
hearings.

Arbitrator Parties decide, but

Decision Maker Parties decide.
decides. conciliator helps.

Can be lengthy, Usually quick, but can

Generally quick, depending
Time Taken but usually faster take time if parties
on willingness of parties.
than courts. hesitate.

Expensive
Cheaper than
(arbitrators’ fees,
Cost Relatively cheaper. arbitration, slightly more
legal
than mediation.
representation).

Award is legally Settlement agreement

Settlement enforceable only
Enforceability enforceable like a has legal status under
if parties agree in writing.
court decree. law once signed.

Relationship Often adversarial Cooperative – preserves Cooperative – helps

Between Parties (winner vs loser). relationships. maintain goodwill.

Limited flexibility
Flexibility due to formal Highly flexible. Moderately flexible.
rules.

Focus on rights Focus on interests and Focus on compromise

Focus
and law. needs. and settlement.

Commercial Industrial disputes,

Family disputes, workplace
Examples of Use disputes, matrimonial disputes,
issues, community conflicts.
construction consumer complaints.
Point of
Arbitration Mediation Conciliation
Difference

contracts,
international trade
disputes.

Part I of
Legal Framework Arbitration and Not strictly codified; guided Part III of Arbitration and
(India) Conciliation Act, by ADR principles. Conciliation Act, 1996.
1996.

Award can be
challenged in
No appeal; settlement is No appeal; settlement
Appeal/Challenge limited situations
voluntary. binding once signed.
(fraud, bias,
violation of law).

Detailed Explanation of Each Method

1. Arbitration

• Arbitration is like a private court.

• Both parties appoint a neutral arbitrator (or a panel of arbitrators).

• After hearing both sides and reviewing evidence, the arbitrator gives an “award”, which
is final and binding.

• It saves time compared to regular courts but is still formal and costly.

• Often used in business contracts, commercial disputes, and international trade.

Example: If two companies have a dispute over a supply contract, they can go to arbitration
instead of court. The arbitrator will decide who is right, and that decision will be enforceable like
a court judgment.

2. Mediation

• Mediation is a friendly process where a mediator helps parties talk and understand
each other.

• The mediator does not decide, only guides the discussion.

• Parties are free to accept or reject suggestions.

• Mediation works best when parties want to continue their relationship (e.g., family,
employment, partnership).

Example: A husband and wife in a divorce case may use mediation to decide on child
custody, property division, and maintenance without fighting in court.
3. Conciliation

• Conciliation is similar to mediation but with one key difference: the conciliator is
more active.

• The conciliator not only facilitates dialogue but also proposes solutions.

• Once the parties agree and sign the settlement, it is legally binding.

• Common in industrial disputes, consumer cases, and family matters.

Example: In a labor strike, a conciliator may meet both workers and management, suggest
compromises (like partial wage increase, better working hours), and help both sides sign a
settlement.

Key Distinctions in Simple Words

1. Arbitration → Like a private judge deciding the case.

2. Mediation → Like a peaceful friend who helps you talk and solve problems yourself.

3. Conciliation → Like a wise elder who listens and also gives suggestions for settlement.

Advantages and Disadvantages

Method Advantages Disadvantages

Binding, quicker than court, neutral

Expensive, formal, adversarial, limited
Arbitration decision maker, enforceable
appeal.
internationally.

Cheap, quick, confidential, preserves Not binding unless agreed, may fail if
Mediation
relationships, flexible. parties don’t cooperate.

Confidential, conciliator suggests May fail if parties don’t accept

Conciliation solutions, binding once signed, less proposals, not suitable for all
formal. disputes.
 2. History of the Arbitration Act

Introduction

Arbitration is one of the most important Alternative Dispute Resolution (ADR) methods.
Instead of going to court, people can settle disputes through arbitration, where a neutral third
party (arbitrator) makes a binding decision.

In India, the Arbitration and Conciliation Act, 1996 is the main law. But this Act is not
something that came up suddenly — it has a long history, influenced by British rule,
international conventions, and reforms.

Let’s go step by step and understand the journey.

Arbitration in Ancient India

• Dispute resolution through arbitration is not new.

• In ancient times, disputes were often resolved by village councils (panchayats), guilds,
or respected community elders.

• These decisions were usually respected and binding.

• This system was simple, quick, and based on community trust.

So, the roots of arbitration in India go back centuries, even before formal laws.

Arbitration during British Rule

When the British came to India, they introduced formal laws to regulate arbitration. They
wanted a system similar to what they had in England.

Major Milestones:

1. Bengal Regulation Act, 1772

o First time arbitration was recognized formally in India.

o Allowed parties to refer disputes to arbitration with mutual consent.

2. Civil Procedure Code (CPC), 1859

o Contained provisions for arbitration in civil disputes.

o However, it was limited and not very effective.

3. Indian Arbitration Act, 1899

o First separate arbitration law in India.

o Applied only to Presidency towns (Calcutta, Bombay, Madras).

o Inspired by the English Arbitration Act, 1889.

o Limited scope, but important as a starting point.

 4. Civil Procedure Code, 1908

o Included Second Schedule, which dealt with arbitration.

o Extended arbitration to areas beyond Presidency towns.

By this stage, arbitration was recognized across India, but the system was still complex and
fragmented.

The Arbitration Act, 1940

After independence, India needed a more comprehensive law.

• In 1940, the Arbitration Act, 1940 was passed.

• It consolidated all earlier provisions into a single law.

Key Features:

• Covered domestic arbitration (within India).

• Allowed courts to play a big role (interference in appointment of arbitrators, procedure,

and even in the award).

• Gave finality to arbitration awards but allowed challenges in courts.

Problems:

• Too much court interference → Defeated the purpose of arbitration (which was
supposed to be quick and independent).

• The procedure was slow and rigid.

• Arbitration became as lengthy as litigation.

Example: Many cases under the 1940 Act took decades to settle, because every small issue
went back to court.

Because of these problems, people started losing faith in arbitration.

International Influence

Globally, arbitration was becoming the preferred method of dispute resolution, especially in
trade and commerce.

Important International Developments:

1. New York Convention, 1958

o International treaty that made foreign arbitral awards enforceable in signatory

countries.

o India signed this Convention in 1960.

2. UNCITRAL Model Law on International Commercial Arbitration, 1985

 o United Nations Commission on International Trade Law (UNCITRAL) created a
model law to harmonize arbitration worldwide.

o Many countries adopted it to make arbitration faster and uniform.

India realized that the 1940 Act was outdated and needed major reform.

Arbitration and Conciliation Act, 1996

Finally, India passed the Arbitration and Conciliation Act, 1996.

• It replaced the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act,
1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961.

• Based on UNCITRAL Model Law, 1985 and UNCITRAL Conciliation Rules, 1980.

Key Features:

• Unified law for domestic arbitration, international arbitration, and enforcement of

foreign awards.

• Reduced court interference.

• Recognized conciliation as a valid ADR method.

• Made arbitration awards enforceable like a court decree.

• Introduced party autonomy (parties free to choose arbitrators, procedure, language,

seat of arbitration).

This Act marked a modern era of arbitration in India.

Amendments to the 1996 Act

Over time, several amendments were made to improve the 1996 Act.

Arbitration and Conciliation (Amendment) Act, 2015

• Reduced court intervention further.

• Time limit of 12 months to complete arbitration (extendable by 6 months).

• Introduced fast-track procedure.

• Made arbitrator’s role more transparent (disclosure of impartiality, independence).

Arbitration and Conciliation (Amendment) Act, 2019

• Established the Arbitration Council of India (ACI) to promote institutional arbitration.

• Provided for arbitrator grading and accreditation.

• Encouraged institutional arbitration instead of ad-hoc arbitration.

Arbitration and Conciliation (Amendment) Act, 2021

 • Further changes to strengthen institutional arbitration.

• Ensured greater fairness in appointment of arbitrators.

Current Scenario

• India is now moving towards becoming an arbitration-friendly country.

• Arbitration is widely used in commercial contracts, construction projects, joint

ventures, intellectual property, and international trade.

• Courts now adopt a pro-arbitration approach, supporting rather than interfering.

Example: In Bharat Aluminium Co. v. Kaiser Aluminium Technical Service (BALCO), 2012,
the Supreme Court upheld the principle of party autonomy and clarified the role of Indian
courts in international arbitration.

The history of arbitration in India can be seen in three broad phases:

1. Pre-independence: Started with British regulations (1772, 1859, 1899, 1908).

2. Post-independence: Arbitration Act, 1940 (ineffective due to court interference).

3. Modern era: Arbitration and Conciliation Act, 1996 (based on UNCITRAL, global
standards).

Over the years, arbitration in India has evolved from a community-based dispute resolution
system to a globally recognized legal mechanism. With recent reforms, arbitration has
become faster, more reliable, and business-friendly.

3. Types of Arbitration: Ad hoc, Institutional, Domestic, and International

Introduction

Arbitration is one of the most popular forms of Alternative Dispute Resolution (ADR). It allows
parties to settle disputes outside courts through a neutral third party (arbitrator) whose
decision is binding.

But arbitration is not the same everywhere. Depending on how it is conducted and where the
parties are located, arbitration can be of different types:

1. Ad hoc Arbitration

2. Institutional Arbitration

3. Domestic Arbitration

4. International Arbitration
Let’s explore each of them in easy language.

1. Ad hoc Arbitration

Meaning:

• In ad hoc arbitration, the parties themselves decide the entire procedure of arbitration.

• There is no permanent institution controlling the process.

• Parties appoint the arbitrator(s), decide fees, place of arbitration, language, and rules.

Key Features:

• Flexibility: Parties control everything.

• No fixed rules: They can adopt their own rules or follow any recognized rules.

• Cost-effective (sometimes): No administrative fees to institutions.

Advantages:

• Simple and tailor-made for the parties.

• Useful when parties trust each other.

• Saves money (no institutional charges).

Disadvantages:

• Can be disorganized if parties don’t cooperate.

• Risk of delay if arbitrator is not efficient.

• No institutional support if disputes arise in procedure.

Example: Two Indian companies include a clause in their contract saying, “If a dispute
arises, it shall be resolved by arbitration by three arbitrators chosen by both parties.” → This is ad
hoc arbitration.

2. Institutional Arbitration

Meaning:

• In institutional arbitration, the arbitration is conducted under the supervision of a

recognized arbitral institution.

• These institutions have their own rules, panel of arbitrators, and administrative
support.

Examples of Institutions:

• India: Indian Council of Arbitration (ICA), Nani Palkhivala Arbitration Centre (NPAC),
Delhi International Arbitration Centre (DIAC).
 • International: International Chamber of Commerce (ICC, Paris), London Court of
International Arbitration (LCIA), Singapore International Arbitration Centre (SIAC).

Key Features:

• Pre-established rules for procedure.

• Institution helps in appointing arbitrators.

• Provides administrative support (hearings, fees, deadlines).

• Awards are recognized worldwide if the institution is reputed.

Advantages:

• Professional and efficient.

• Saves time (rules already fixed).

• Reduces scope of disputes about procedure.

• Easier enforcement internationally.

Disadvantages:

• Expensive (institution charges administration fees).

• Less flexibility compared to ad hoc arbitration.

Example: A contract between an Indian company and a Singapore company says disputes
will be resolved by arbitration under SIAC Rules. This is institutional arbitration.

3. Domestic Arbitration

Meaning:

• Domestic arbitration means arbitration conducted within the same country, and both
parties are from that country.

• The law of that country applies to the arbitration process.

Key Features:

• Both parties are Indian (or of the same nationality).

• Conducted in India under Indian Arbitration law.

• Governed by Arbitration and Conciliation Act, 1996 (in India).

Advantages:

• Simpler and cheaper than international arbitration.

• Enforced easily within the country.

• Suitable for internal business disputes.

Disadvantages:
 • Award may not be enforceable outside the country.

• May lack global credibility compared to international awards.

Example: A construction company in Delhi and a supplier in Mumbai have a dispute. They
go for arbitration in Delhi under the Arbitration and Conciliation Act, 1996. → This is domestic
arbitration.

4. International Arbitration

Meaning:

• Arbitration becomes international when:

1. The parties are from different countries, OR

2. The subject matter of the dispute involves international trade/commerce, OR

3. The place of arbitration is outside the home country.

• Governed by international conventions like the New York Convention, 1958.

Key Features:

• At least one foreign party involved.

• Usually conducted in neutral venues like Singapore, London, Paris.

• Parties can choose applicable law (e.g., English law, Swiss law).

Advantages:

• Neutral and fair for international business.

• Globally recognized (easy enforcement under New York Convention).

• Trusted by foreign investors.

Disadvantages:

• Very expensive (fees, international travel, legal experts).

• Complex procedure.

• Time-consuming if multiple jurisdictions are involved.

Example: An Indian software company and an American IT company have a contract. Their
arbitration clause says disputes will be resolved under ICC Rules in Paris. → This is
international arbitration.

Comparative Table
 Who Controls
Type Meaning Cost Examples
Procedure?

Two Indian
Parties design their
Relatively companies
Ad hoc own procedure, no Parties themselves.
cheaper. appointing their
institution.
own arbitrator.

Managed by an
Institution + Arbitration under
Institutional arbitral institution Expensive.
parties. ICC, SIAC, ICA.
under fixed rules.

Parties belong to the Local arbitration

Cheaper than Indian contractor vs
Domestic same country, law (e.g., 1996 Act
international. Indian supplier.
governed by local law. in India).

Parties from different

International rules Indian company vs
countries or
International and law chosen by Very expensive. US company under
international
parties. ICC in Paris.
contracts.

Choosing the Right Type of Arbitration

1. Ad hoc arbitration is best when:

o Disputes are simple.

o Parties trust each other.

o They want to save money.

2. Institutional arbitration is best when:

o Disputes are complex.

o Parties want a professional system.

o International recognition is needed.

3. Domestic arbitration is best when:

o Both parties are from the same country.

o Disputes are national in nature.

4. International arbitration is best when:

o Parties belong to different countries.

o Contracts involve cross-border trade.

o Neutrality and global enforcement are important.

 Advantages of Having Different Types

• Gives parties freedom of choice.

• Suits both small domestic businesses and large multinational corporations.

• Helps in reducing pressure on courts.

• Builds trust in business relations, especially in international trade.

Arbitration has many forms depending on the needs of the parties:

• Ad hoc → Simple, flexible, party-controlled.

• Institutional → Professional, rule-based, internationally recognized.

• Domestic → National disputes within one country.

• International → Cross-border disputes, global standards.