The Arbitration and Conciliation Act, 1996 (the Act) is based on the UNCITRAL Model Law on international commercial arbitration and conciliation. While the Act was not intended to displace the judicial system, the new law ushered in an era of private arbitration and conciliation. It was also the first time that a comprehensive legislation was made on the subject of conciliation in India. This bulletin will provide an overview of the conciliation proceedings in India along with the relevant provisions under various statutes.
Conciliation under the Act:
The UNCITRAL Rules on Conciliation, 1980 recognized the value of conciliation as a method of amicably settling disputes arising in the context of international commercial relations and that adoption of uniform conciliation rules by countries with different legal, social and economic systems would significantly contribute to the development of harmonious international economic relations.1 Accordingly, these rules were closely followed by the Indian legislators to formulate conciliation rules under Part III of the Act.
Principles of conciliation:
The procedure laid down in Part III of the Act reflects the following broad principles:
- non-adversary nature of conciliation proceedings : there is no claimant or plaintiff in conciliation proceedings,
- voluntary nature of proceedings : any party can commence and discontinue the proceedings,
- flexible procedure : the conciliator has the discretion to adopt any procedural law to ensure speedy and inexpensive conduct of proceedings, and
- decisions are recommendatory : disputes are settled by mutual agreement and not by imposed decisions.
Definition of conciliation:
The term conciliation is not defined in the Act. However, simply put conciliation is a confidential, voluntary and private dispute resolution process in which a neutral person helps the parties to reach a negotiated settlement.
This method provides the disputing parties with an opportunity to explore options aided by an objective third party to exhaustively determine if a settlement is possible. Like arbitration, the Act covers both domestic and international disputes in the context of conciliation. International conciliation is confined only to disputes of commercial nature.
As per the Act, the definition of international commercial conciliation is exactly similar to that of international commercial arbitration.
Accordingly, the Act defines international commercial conciliation as conciliation proceedings relating to a dispute between two or more parties where at least one of them is a foreign party.
The foreign party may be an individual who is foreign national, a company incorporated outside India, or the government of a foreign country.
The role of a conciliator
As per section 80 of the Act, the conciliator does not decide for the parties, but strives to support them in generating options in order to find a solution that is compatible for both of them, thereby fulfilling the mandate of section 67 of the Act under which the main function of the conciliator is to assist the parties to reach an amicable settlement.4
For achieving this, a conciliator is obliged to
(1) act in an independent and impartial manner, and (2) abide by the principles of objectivity, fairness and justice.
5 Section 67(4) specifically enables the conciliator to make proposals for settlement of the dispute at any stage of the conciliation proceedings.
The above provisions make it clear that the conciliator, apart from assisting the parties to reach a settlement, is also permitted and empowered to make proposals for a settlement and formulate/reformulate the terms of a possible settlement.
Legal intern at Lexcliq