Conciliation: A flexible approach to dispute resolution

Introduction

• Alternative Dispute Resolution (ADR) refers to a collection of processes that help resolve disputes outside the traditional court system, offering quicker, cost-effective, and flexible solutions. One such important method of ADR is conciliation.
• Conciliation is a voluntary and non-binding ADR technique where an impartial third party, known as the conciliator, helps the disputing parties reach an amicable settlement in a friendly and cooperative manner.
• Unlike other ADR methods such as arbitration, conciliation emphasizes mutual agreement and collaboration between the parties. It allows the parties to maintain control over the outcome of the dispute while preserving their relationship.
• If the parties successfully reach an agreement, they can execute a settlement agreement, which becomes legally binding once endorsed by the conciliator.
• Section 89 of the Civil Procedure Code (CPC) ushers in a progressive shift towards Alternative Dispute Resolution (ADR) mechanisms, with conciliation standing at the forefront. Section 89 empowers courts to refer cases for conciliation when appropriate, offering parties a chance to resolve their differences in a manner that is both amicable and efficient.
• The legal framework for conciliation in India is governed by Part III of the Arbitration and Conciliation Act, 1996, which applies to all disputes, whether they arise from contractual or non-contractual legal relations.
• The conciliation process begins when one party sends a written invitation to the other, outlining the issue in dispute. If the other party agrees, the conciliation process can commence.
• As a method of ADR, conciliation offers several advantages, such as its informal process, cost-effectiveness, and ability to preserve long-term relationships, making it ideal for a wide range of disputes, particularly where cooperation is essential.

Concept of Conciliation

• Under Part III of the Arbitration and Conciliation Act, 1996, conciliation is a voluntary and non-binding process where a neutral third party, called a conciliator, assists the disputing parties in reaching an amicable settlement.
• According to Section 61(1) of the Act, conciliation applies to disputes arising out of legal relationships, whether contractual or not, and is not restricted to any specific type of legal dispute. The Act outlines the process and gives legal recognition to conciliation as an alternative dispute resolution method.
• Section 62 states that the conciliation process formally begins when one party sends a written invitation to the other party to resolve the dispute through conciliation. The process commences only when the other party accepts the invitation in writing.
• The Act emphasizes the conciliator’s role in promoting settlement by proposing solutions, facilitating negotiations, and encouraging communication. It allows parties to retain control over the outcome, as any settlement reached must be mutually agreed upon to become binding, as per Section 73.

Principles/ Characteristics of Conciliation

1. Independence and Impartiality [Section 67(1)]: The conciliator must act independently and impartially while assisting the parties in resolving their dispute. The goal is to help the parties reach an amicable settlement in a fair and neutral manner.

2. Fairness and Justice [Section 67(2)]: The conciliator should be guided by principles of fairness and justice. This includes considering the rights and obligations of the parties, trade practices, and the circumstances surrounding the dispute, including any prior business dealings between the parties.

3. Confidentiality [Section 70]: Both the conciliator and the parties are obligated to maintain confidentiality regarding all matters related to the conciliation process. If a party shares information with the conciliator under the condition of confidentiality, the conciliator must not disclose it to the other party.

4. Disclosure of Information [Section 70]: If the conciliator receives relevant information from one party, they are required to disclose the substance of that information to the other party. This allows the other party to provide a suitable explanation or response.

5. Cooperation of the parties with the Conciliator [Section 71]: Parties must cooperate with the conciliator in good faith. They are expected to submit written materials, provide evidence, and attend meetings when requested by the conciliator to facilitate the resolution process.

Advantages of Conciliation

1. Voluntary and Flexible: Parties voluntarily participate and retain control over the process, with the flexibility to tailor discussions according to their needs.

2. Cost-Effective: Conciliation is usually less expensive than litigation or arbitration, reducing legal fees and related costs.

3. Maintains Relationships: The cooperative nature of conciliation helps preserve business, family, or personal relationships by avoiding adversarial conflict.

4. Confidentiality: Proceedings are private, ensuring sensitive information is not disclosed publicly.

5. Quick Resolution: Conciliation often results in faster settlements compared to formal court proceedings.

Disadvantages of Conciliation

1. Non-Binding: Unless both parties agree to a settlement, the process is non-binding, and either party can walk away without resolution.

2. No Legal Precedent: Conciliation does not establish legal precedents, which may be necessary for future cases involving similar disputes.

3. Power Imbalances: In cases where one party is significantly more powerful than the other, there is a risk of unequal influence over the settlement.

4. No Guarantee of Settlement: Since the process is voluntary, there is no certainty that the parties will reach a settlement, potentially leading to further legal action.

5. Limited Enforcement: Without a signed settlement agreement, there is no enforceable outcome, and the process may need to move to arbitration or litigation.

Role of the Conciliator

The conciliator plays a critical role in facilitating the resolution of disputes through conciliation as outlined in Part III of the Arbitration and Conciliation Act, 1996. The Act defines the conciliator’s role and responsibilities, emphasizing neutrality, flexibility, and the aim of guiding parties toward an amicable settlement.

1. Independence and Impartiality – Section 67(1)

• The conciliator must act in an impartial, independent, and fair manner while facilitating the resolution of disputes. This ensures that the process is balanced and neither party feels disadvantaged.
• The conciliator is required to maintain objectivity and consider all factors important to each party’s position during the proceedings.

2. Role as a Facilitator – Section 67(2)

• The conciliator assists in improving communication between the disputing parties. They play an active role in clarifying issues, exploring potential solutions, and fostering mutual understanding between the parties.
• The primary aim of the conciliator is to facilitate dialogue and guide the parties toward finding a mutually acceptable solution without imposing any decisions.

3. Proposing terms of Settlement – Section 67(4)

• The conciliator may, at any stage of the conciliation proceedings, make proposals or suggest the terms for the settlement of the dispute. These proposals are not binding on the parties and are intended to encourage compromise and agreement.
• The proposals can be made orally or in writing, and they are based on the conciliator’s understanding of the parties’ needs and interests.

4. Confidentiality – Section 70

• The conciliator is bound by a duty of confidentiality. Information shared by one party with the conciliator cannot be disclosed to the other party without explicit consent.
• This promotes a secure environment where the parties can freely discuss sensitive issues, knowing that the information will not be used against them.

5. Settlement Agreement – Section 73

• If the parties reach an agreement, the conciliator helps draft a settlement agreement, which reflects the terms of the resolution.
• Once both parties sign the agreement, it becomes binding and enforceable, akin to an arbitral award or court decree, provided it is endorsed by the conciliator.

6. Termination of Proceedings – Section 76

The conciliator’s role comes to an end when:

• A settlement agreement is signed.
• Either party gives a written declaration that the conciliation process should be terminated.
• The conciliator concludes that further efforts at conciliation are unlikely to resolve the dispute.

Procedure of Conciliation

The conciliation process, as governed by Part III of the Arbitration and Conciliation Act, 1996, is a structured yet flexible mechanism aimed at resolving disputes in an amicable manner with the assistance of a neutral third party (conciliator). Below is an outline of the key steps involved in the conciliation process:

1. Initiation of Conciliation – Section 62

• The process of conciliation begins when one party sends a written invitation to the other party to resolve the dispute through conciliation.
• The invitation should specify the substance of the dispute, allowing the other party to understand the issue at hand.
• The conciliation process only commences if the other party accepts the invitation in writing. If the other party does not accept within 30 days, or within the proposed time frame, conciliation cannot proceed.

2. Appointment of Conciliators – Section 64

• The parties can mutually agree on appointing one or more conciliators (often just one).
• If the parties cannot agree, each party may appoint one conciliator, and the two conciliators can appoint a third conciliator, who will serve as the presiding conciliator.
• Conciliators must act impartially and independently, with the goal of helping the parties reach a settlement.

3. Role of the Conciliator – Section 67

• Once appointed, the conciliator facilitates communication between the parties, helping them identify the issues, explore possible solutions, and encourage compromise.
• The conciliator may make proposals for settlement at any stage, and their role is to guide the discussions toward a mutually agreeable solution.
• The conciliator also ensures confidentiality of the proceedings, maintaining trust and openness between the parties.

4. Communication and Meetings – Section 69

• The conciliator arranges meetings with both parties, either jointly or separately. This flexibility allows the conciliator to communicate with each party privately to understand their positions better.
• The conciliator manages the discussions, focusing on the interests of both parties, and ensures a cooperative and non-adversarial environment.

5. Proposals for Settlement – Section 67(4)

• At any stage of the proceedings, the conciliator can suggest solutions or propose terms of settlement.
• These proposals are non-binding, meaning the parties are free to accept or reject them. The goal is to find common ground without imposing a decision on the parties.

6. Settlement Agreement – Section 73

• If the parties reach a mutual agreement, the conciliator helps to draft a settlement agreement.
• This agreement outlines the terms of the resolution and is signed by the parties.
• Once signed, the agreement becomes final and binding, having the same legal effect as an arbitral award or a court decree.

7. Termination of Conciliation Proceedings – Section 76

The conciliation process may be terminated in any of the following ways:

• Upon signing of the settlement agreement.
• By a written declaration from the conciliator that further efforts are unlikely to resolve the dispute.
• If one party sends a written declaration to the other party and the conciliator indicating they wish to terminate the proceedings.

8. Confidentiality – Section 70

• All information exchanged during the conciliation proceedings remains confidential. Any facts shared by one party cannot be disclosed to the other party without consent.
• This encourages openness and trust, as parties are more likely to reveal their interests and concerns in a private setting.

9. Costs of Conciliation – Section 78

• The costs of conciliation, including the fees of the conciliators, are usually shared equally by both parties unless otherwise agreed upon.
• This ensures fairness in the financial burden of resolving the dispute.

Difference between Arbitration and Conciliation

Aspect	Arbitration	Conciliation
Nature of Process	Formal process: arbitrator makes a binding decision.	Informal process: conciliator suggests solutions for agreement.
Role of Third Party	Arbitrator acts as a judge, making a decision based on evidence.	Conciliator acts as a facilitator, helping parties find common ground.
Binding Decision	The arbitrator’s decision is binding and enforceable by law.	The conciliator’s suggestions are non-binding unless agreed upon by the parties.
Legal Framework	Governed by the Arbitration and Conciliation Act, 1996 (in India).	Also governed by the Arbitration and Conciliation Act, 1996 but in a separate part for conciliation.
Formal v/s Informal	More formal, similar to court proceedings with evidence presentation and witnesses.	Informal, flexible process focusing on dialogue and mutual understanding.

Conclusion

Conciliation offers a valuable, non-binding ADR method focused on cooperation and mutual agreement, suitable for maintaining relationships and resolving disputes without the adversarial nature of arbitration.

While arbitration results in a binding, enforceable decision, conciliation empowers parties to craft their own solutions with the assistance of a neutral third party, making it an attractive option for more amicable resolutions. Both processes are essential tools in ADR, with their own unique advantages depending on the nature of the dispute.