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Home / IAS Preparation / Arbitration And Conciliation Bill

Arbitration and Conciliation - Key Features of Bill 2021, 2015, and 1996!

Last Updated on Oct 16, 2023
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Arbitration and Conciliation are the two most effective and efficient alternative dispute resolution techniques. Before resorting to litigation, parties can use different forms of legal ways to resolve their critical problems. Arbitration and Conciliation use an impartial individual to assist disputing parties in resolving or narrowing the issues between them. They can be used for both personal and commercial tensions. 

All these concepts of Arbitration and Conciliation are important for UPSC Civil services, State civil services, etc.

In order to understand the topic in detail, Testbook prepares the best quality notes for civil service aspirants. Study major topics of Indian Polity from the perspective of UPSC Exams.

What is Alternative Disputes Resolution (ADR) & its Examples

Alternative Dispute Resolution (ADR) is a set of mechanisms for resolving conflicts or disputes informally and confidentially, rather than through lengthy and expensive legal proceedings.

Examples of ADR are Mediation, Arbitration, and Conciliation.

Note about Mediation in ADR – Mediation is one form of ADR that is essentially third-party facilitation of a negotiation. Mediation, unlike arbitration, which is a kind of alternative dispute resolution that is similar to a trial, does not involve a neutral third party making decisions.

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Differences between Arbitration and Conciliation

Arbitration

Conciliation

Arbitration is a method of resolving disputes in which a neutral third party is chosen to examine the facts and merits of a disagreement and render a binding judgment on the parties.

Conciliation is a method in which disputing parties, with the help of a dispute resolution practitioner, Examine the topics in dispute, create ideas and possibilities for a favorable settlement term, consider alternatives, and try to reach a mutual agreement.

Arbitration can be used if all parties to the dispute must have agreed to it beforehand.

The conciliator’s key role is to support mediation and advocate for a mutual settlement of disputes, as well as to produce choices and examine alternatives.

The arbitration may be ordered by a court or stipulated in a contract.

Conciliation has the added advantage of allowing the conciliator to participate in and come up with ideas during the parties’ discussions.

Both parties have the opportunity to present evidence and argue their case during the arbitration. This method is faster than using courts and tribunals, and the arbitrator, like a judge, has the authority to make a binding decision on the parties and to enforce that decision, which is referred to as an “award.”

Conciliation can be requested by either party, but the other parties must agree to the appointment of a conciliator.

Arbitration is one of the important dispute resolution techniques that is frequently utilized in the areas of employment, construction, and family disputes.

The entire cost of the conciliation is partly divided between both parties.

Check out the complete Permanent Court of Arbitration here.

Objectives of Arbitration
  • Arbitration’s objective is to get a fair resolution of disputes by an unbiased third party without wasting time or money.
  • Parties should be free to agree on how to resolve their disagreements, subject only to the safeguards required for public goods.

Objectives of Conciliation
  • Conciliation’s major objective is to assist parties in reaching an agreement without having to go to court.
  • Conciliation is less expensive than going to court and fighting matters for years on end.

Arbitration and Conciliation (Amendment) Bill, 2021
  • The Arbitration and Conciliation (Amendment) Bill, 2021 was presented in the Lok Sabha on 4th February 2021.
  • It focuses on altering the 1996 Arbitration and Conciliation Act.
  • This Act includes laws relating to domestic and international arbitration and also states the definition of the law governing conciliation proceedings.

Key Features of the Arbitration and Conciliation Bill, 2021
  • The 2021 Amendment to the Arbitration and Conciliation Act 1996 is the third in the last six years to the primary Act.
  • This demonstrates that the Indian legislation is working to modernize ADR systems in order to comply with international standards.
  • The amendment allows for an automatic stay on the enforcement of any arbitral awards if the courts discover clear evidence of fraud or corruption in the award.
  • Using Section 2 of the Primary Act, this alteration has been incorporated under Section 36 of this Act.
  • This primary Act’s Eighth Schedule, which stated the arbitrator’s credentials, experience, and standards to be followed, was removed.

Arbitration and Conciliation Act, 2015
  • While introducing the Arbitration and Conciliation (Amendment) Bill, 2015 in Parliament, the Government of India intended to alter the Arbitration and Conciliation Act, of 1996.
  • The Union Cabinet, chaired by the Prime Minister, had approved revisions to the Arbitration and Conciliation Bill, 2015, based on the Law Commission’s recommendations and stakeholder comments.
  • The President of India promulgated an Ordinance (“Arbitration and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and Conciliation Act, 1996 on October 23, 2015, in an attempt to make arbitration a preferred mode of resolving commercial disputes and to make India a hub of international commercial arbitration.

Three Main Objectives of Arbitration and Conciliation Act, 2015
  • To make arbitration more investor-friendly,
  • To make it cost-effective, and appropriate for quick case resolution.
  • To assist India in becoming a significant international commercial arbitration centre.

Key Features of Arbitration and Conciliation Act, 2015
  • When approached, arbitrators must disclose any relationship or interest that could raise questions.
  • Arbitrators with a specific connection to the case cannot serve.
  • Arbitral tribunals must render their decision within 12 months.
  • Parties can extend the time limit by six months, but then only the court can extend it for good reason.
  • If the court finds that the tribunal delayed the proceedings, it may reduce the arbitrators' remuneration by up to 5% per month of delay.
  • If the award is made within six months, the arbitrators may get additional compensation if the parties agree.
  • A fast-track procedure may be introduced for conducting arbitration.
  • Parties can agree to use a fast-track procedure, in which case the award will be made within six months.
  • Section 34, on grounds for challenging an arbitral award, is amended to limit the term "Public Policy of India" by stating that the award shall be treated as against the Public Policy of India only if it was induced or influenced by fraud or corruption, or if it is in violation of the fundamental policy of Indian law, or if it is in conflict with the most basic notions of morality or justice.
  • The latest provision states that any challenge to the award must be resolved by the Court within one year.
  • Section 36 is amended to clarify that just filing an application to challenge the award will not prevent it from being carried out. Only when the Court has made a particular ruling on an application submitted by the party can the award be stayed.
  • The latest sub-section in Section 11 should be inserted to the effect that an application for the appointment of an arbitrator should be dealt with as quickly as feasible by the High Court or Supreme Court, with a goal of resolving the dispute within 60 days.
  • A new Section 31A will be introduced to the bill to provide comprehensive cost-management requirements.
  • It applies to arbitrators as well as related legal proceedings in court. It will prevent needless and spurious litigation and arbitration.
  • Section 17 of the Act will be revised to allow the Arbitral Tribunal to issue all types of interim measures that the Court is authorized to grant under Section 9 of the Act, and such order will be enforced in the same way as a court order.

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Arbitration and Conciliation Act of 1996
  • The law governing arbitration is found in the Arbitration and Conciliation Act of 1996.
  • On January 25, 1996, this act was added to the constitution.
  • It offers worldwide commercial arbitration, local arbitration, and foreign arbitral award enforcement.
  • It is based on the UN law paradigm and is equivalent to the international trade law adopted by the United Nations Commission.
  • The act’s preamble is construed as follows –
    • Domestic Arbitration
    • Foreign Arbitral Awards are enforced.
    • International and Commercial Arbitration

Objectives of Arbitration and Conciliation Act of 1996
  • Ensure that regulations for both domestic and international arbitration and conciliation are established.
  • Ascertain that these processes are sufficient.
  • To minimize the court’s involvement in this process.
  • To save money and time.
  • To reach a mutual agreement between the two parties of the disputes.
  • Arbitration and Conciliation is a fair process because all parties determine the location, time, and language.

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Nature and Scope of Arbitration and Conciliation Act of 1996
  • In Arbitration, the two parties’ disagreement is resolved through a quote from a third party chosen by both parties.
  • The conventional consensus is that legal action is expensive, time-consuming, and fraught with pitfalls.
  • As a result, arbitration provides an alternative method of resolving conflicts, allowing the parties to settle their differences outside of a court of law.

Alternative Dispute Resolution(ADR) is a means of resolving disputes without the intervention of a court or outside of the legal system. Other means of alternative dispute resolution, such as Mediation, Arbitration, and Conciliation.
  • Due to the court’s delays in delivering justice, these tactics have proven to be incredibly successful and time-saving.
  • Arbitration has grown in popularity in our country. Its main motivation is to deliver immediate justice to both parties.

Two Main Types of Arbitration Proceedings are
  • Domestic Arbitration – When a dispute arises in Indian territory, it is governed by Indian law. The parties’ origin or nationality should be Indian in domestic arbitration.
  • Institutional Arbitration – In this case, an institute assists the parties in determining the arbitration method. The search institution is in charge of things like assigning an arbitrator, setting a deadline for filing documents, and so on. By providing administrative help to the parties, institutional arbitration reduces their burden. This timely guidance aids in the speeding up of the procedure.

Conclusion

Hence, The parties to a disagreement have complete control over the process of conflict resolution. Conciliation may be explored if both sides can agree on a mutually acceptable outcome. Arbitration may be preferable if both parties want an independent party to make a binding and enforceable decision.

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Arbitration and Conciliation- FAQs

Arbitration and Conciliation use an impartial individual to assist disputing parties in resolving or narrowing the issues between them.

Alternative Dispute Resolution (ADR) is a set of mechanisms for resolving conflicts or disputes informally and confidentially, rather than through lengthy and expensive legal proceedings.

The arbitration may be ordered by a court or stipulated in a contract whereas, Conciliation has the added advantage of allowing the conciliator to participate in and make ideas during the parties' discussions.

It is recommended to introduce a provision for a fast-track procedure for conducting the arbitration. Parties to the disagreement may agree that their dispute is addressed using a fast-track procedure.

The amendment allows for an automatic stay on the enforcement of any arbitral awards if the courts discover clear evidence of fraud or corruption in the award.
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