TOPIC:CONCILLIATION- CONCEPT, POLICY AND CHALLENGES

INTRODUCTION:It may be remembered that the UNCITRAL Model Law on arbitration and Rules on
Conciliation were both made in the context of growing international trade and
commercial relations against the back-drop of liberalization, privatization and
globalization. UNCITRAL Rules on Conciliation of 1980 adopted by the General
Assembly of the United Nations stated at the very outset that the General Assembly
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. However, the Indian Arbitration and Conciliation
Act in substantially adopting the UNCITRAL Model Law and Rules on international
commercial arbitration and conciliation, has also covered the law relating to
domestic arbitration, international commercial arbitration and enforcement of
foreign arbitral awards and also to define the law relating to conciliation.
(Preamble). Parts I, II and III of the Act dealt respectively with arbitration,
enforcement of foreign awards and conciliation. As with arbitration so with
conciliation, the Act covered both domestic and international disputes but
international arbitration was confined only to disputes of commercial nature
because of the reservations made by India to the relevant international conventions
on international arbitration (See S. 2, Cl. (1)(f) , S. 44, S.53) and the same
reservation was extended to international conciliation also, though there were no
applicable international conventions on conciliation (See S. 1,Cl. (1). In fact, it was
for the first time in the history of Indian legislation that a comprehensive legislation
was made on the subject of conciliation.
CONCEPT OF CONCILIATION:In order to understand what Parliament meant by Conciliation, we have necessarily
to refer to the functions of a Conciliator as visualized by Part III of the 1996 Act. It
is true, section 62 of the said Act deals with reference to Conciliation by agreement
of parties but sec. 89 permits the Court to refer a dispute for conciliation even
where parties do not consent, provided the Court thinks that the case is one fit for
conciliation. This makes no difference as to the meaning of conciliation under sec.
89 because, it says that once a reference is made to a conciliator, the 1996 Act
would apply. Thus the meaning of conciliation as can be gathered from the 1996
Act has to be read into sec. 89 of the Code of Civil Procedure. The 1996 Act is, it
may be noted, based on the UNCITRAL Rules for conciliation. Now under section 65
of the 1996 Act, the conciliator may request each party to submit to him a brief
written statement describing the general nature of the dispute and the points at

issue. He can ask for supplementary statements and documents. Section 67

describes the role of a conciliator. Subsection (1) states that he shall assist parties
in an independent and impartial manner. Subsection (2) states that he shall be
guided by principles of objectivity, fairness and justice, giving consideration, among
other things, to the rights and obligations of the parties, the usages of the trade
concerned and the circumstances surrounding the dispute, including any previous
business practices between the parties. Subsection (3) states that he shall take into
account the circumstances of the case, the wishes the parties may express,
including a request for oral statements. Subsection (4) is important and permits
the conciliator to make proposals for a settlement. It states as follows: Section
67(4). The conciliator may, at any stage of the conciliation proceeding, make
proposals for a settlement of the dispute. Such proposals need not be in writing and
need not be accompanied by a statement of the reasons therefor. I shall briefly
refer to the other provisions before I come to sec. 73. Section 69 states that the
conciliator may invite parties to meet him. Sec. 70 deals with disclosure by the
conciliator of information given to him by one party, to the other party. Sec. 71
deals with cooperation of parties with the conciliator, sec. 72 deals with suggestions
being submitted to the conciliator by each party for the purpose of settlement.
Finally, Sec. 73, which is important, states that the conciliator can formulate terms
of a possible settlement if he feels there exist elements of a settlement. He is also
entitled to reformulate the terms after receiving the observations of the parties.
Subsection (1) of sec. 73 reads thus: Sec. 73(1) settlement agreement. (1) When it
appears to the Conciliator that there exist elements of a settlement which may be
acceptable to the parties, he shall formulate the terms of a possible settlement and
submit them to the parties for their observations. After receiving the observations of
the parties, the Conciliator may reformulate the terms of a possible settlement in
the light of such observations. The above provisions in the 1996 Act, make it clear
that the Conciliator under the said Act, apart from assisting the parties to reach a
settlement, is also permitted to make proposals for a settlement and formulate
the terms of a possible settlement or reformulate the terms. This is indeed the
UNCITRAL concept.

Conciliation vis-a-vis Arbitration under the 1996 Act:While arbitration is more privatized than judicial settlement, conciliation is more
privatized than arbitration. As judicial settlement and arbitration are species of
adjudication, the judge and the arbitrator render their verdicts and impose them,
with or without the consent or in spite of dissent, on the part of the parties. While
the parties to arbitration are given considerable freedom to regulate the modalities,
barring some non-derogable provisions, at various stages of the arbitral
proceedings, they have no control over the decision making process except in the
case of award on agreed terms. Secondly, while S 7(2) of the Act requires that an
arbitration agreement shall be in writing, there is no such express provision in Part
III regarding conciliation. But that does not make any practical difference as the

process of conciliation starts with the written offer and written acceptance to
conciliate on the part of the parties. Conversely, in arbitration, even in the absence
of a prior written agreement, if the parties appoint the arbitrator and proceed with
the submission of written claim and defense and continue with the proceedings till
they culminate in the award, the requirement of S. 7(2).under 4 ( c ) should be
taken as complied with. Thirdly, while it would be possible to parties to enter into an
arbitration agreement even before the dispute has arisen under S.7 (1) (all or
certain disputes which have arisen or which may arise), it would appear from the
language of S. 62 that it would not be possible for the parties to enter into
conciliation agreement even before the dispute has arisen. S. 62 provides: 1. The
party initiating conciliation shall send to the other party a written invitation to
conciliate under this part, briefly identifying the subject of the dispute. 2.
Conciliation proceedings shall commence when the other party accepts in writing
the invita- tion to conciliate. The above provision clearly requires that the
conciliation agreement should be an ad hoc agreement entered into after the
dispute has arisen and not before. A conciliation agreement entered into before the
dispute has arisen may have the effect of ousting the jurisdiction of the Courts in
relation to the subject matter of the dispute and such an agreement can be saved
only by making an amendment to S 28 of the Indian Contract Act as it was done in
1972 to save the arbitration agreement. After the enactment of the 1996 Act
covering both arbitration and conciliation, there can be no objection, either
theoretical or practical, for not permitting the parties to enter into a conciliation
agreement regarding the settlement of even future disputes ousting the jurisdiction
of the courts. This is particularly so in the light of the fact that the Act treats the
conciliation settlement agreement authenticated by the conciliator on par with
award on agreed terms which in turn is treated on par with any arbitral award. (See,
SS 74 and 30). Fourthly, S 30 of the 1996 Act permits the parties to engage in
conciliation process even while the arbitral proceedings are on. They may do so on
their own and settle the dispute through conciliation or authorize the arbitrator
himself to use mediation or conciliation and settle the dispute. The arbitrator would
record the settlement in the form of an arbitral award. However S.77 of the Act bars
the initiation of any arbitral or judicial proceedings in respect of a dispute which is
the subject matter of conciliation proceedings, except for the purpose of
preserving their rights. The term initiation in S 77 clearly supports the provision
in S. 30. That is, when the arbitral or judicial proceedings are on, the parties are
even encouraged to initiate conciliation proceedings but when the conciliation
proceedings are on they are barred from initiating arbitral or judicial proceedings.
The raisons de etre of the provision (S.16 of the Draft) were given in the
Commentary on the Revised Draft UNCITRAL Conciliation Rules: Report of the
Secretary General as follows: 74. Article 16 deals with the delicate question
whether a party may resort to court litigation or arbitration whilst the conciliation
proceedings are under way. 75. Article 16 emphasizes the value of serious
conciliation effort by expressing the idea that, under normal circumstances, court or
arbitration proceedings should not be initiated as might adversely affect the

prospects of an amicable settlement. However, the article also takes into account
that resort to courts or to arbitration does not necessarily indicate an unwillingness
on the part of the initiating party to conciliate. In view of the fact that, under article
15(d), an unwilling party may terminate the conciliation proceedings at any time, it
may well be that, if a party initiates court or arbitral proceeding, he does so for
different reasons. 76 For example, a party may want to prevent the expiration of a
prescription period or must meet the requirement, contained in some arbitration
rules, of prompt submission of a dispute to arbitration. Instead of attempting to set
out a list of possible grounds, article 16 adopts a general and subjective formula:
except that a party may initiate arbitral or judicial proceedings where, in his
opinion, such proceedings are necessary for preserving his rights. From the above
it can be seen that the real purpose of provisions in SS. 30 and 77 of the Act was,
firstly, to encourage resort to non-formal conciliation in preference to the formal
court and arbitral proceedings. Secondly, resort to arbitral or judicial proceedings
was permitted as an exception to meet the cases of requirements of the general law
of limitation or of time-bar clauses like the Atlantic Shipping Clause Atlantic
Shipping and Trading Company v. Dreyfus and Company ( (1992) 2 AC 250) or
interim measures of protection.

Conciliation under the Civil Procedure Code Amendment Act 1999:As mentioned at the out set, the recent amendments made in 1999 to the Civil
Procedure Code have introduced provisions to enable the courts to refer pending
cases to arbitration, conciliation and mediation to facilitate early and amicable
resolution of disputes. The 1996 Arbitration and Conciliation Act does not contain
any provision for reference by courts to arbitration or conciliation in the absence of
the agreement between the parties to that effect. Under that Act arbitration and
conciliation are purely consensual and not compulsory. But under the newly added S
89 of CPC, the Court can refer the case to arbitration etc where it appears to the
court that there exist elements of settlement which may be acceptable to the
parties. The Court can formulate the terms of settlement and give them to the
parties for their observation and after receiving the observations, the Court may
reformulate the terms of a possible settlement and refer the same for arbitration,
conciliation, mediation etc. As can be seen from the language of the S. 89, the
initiative and the role of the Court is considerable in the whole process. Here, the
Court is not ascertaining the agreement of the parties but only their observations,
because if there is agreement between the parties at the stage of formulation of
possible terms of settlement, the Court can as well make it the basis of its
judgement and there would be no need for further negotiations under the aegis of
arbitration or conciliation. But once the Court refers the case to arbitration or
conciliation, that reference creates a legal fiction that it is deemed to be a reference
under the provisions of the 1996 Act and the provisions of that Act would take over
from the provisions of the CPC under which the reference was made. Thus, if the

parties choose to do so, the conciliation proceedings so commenced by Courts

reference under S 89 of CPC can be terminated by the parties or the conciliator
under S 76 of the 1996 Act.
How Can Recourse to Conciliation be Sought ?
Conciliation is a procedure mutually agreed to by the parties. Recourse to this
procedure can be had
(i)

by entering into an agreement for seeking a settlement of the dispute by

conciliation. The agreement can be entered into either before a dispute has
arisen or after the actual dispute arises. It can be an independent agreement,
or in the form of a clause in the main contract.

(ii)

even where there is no agreement between the parties to seek settlement of

the dispute by conciliation, a party desiring conciliation may send to the
other party a written invitation to conciliate. Recourse to conciliation can be
had if the other party accepts the invitation to conciliate. There can be no
conciliation if the other party rejects the invitation.

Who can seek Conciliation ?

Any of the parties, competent to contract can seek an amicable settlement of their
dispute through conciliation. The parties may belong to the same or different
nationalities.

Number of Conciliators:Normally, there is one conciliator but the parties have freedom to agree that there
should be two or three conciliators.
What Role does the Conciliator Play ?
The conciliator assists the parties in an independent and impartial manner in their
attempt to reach an amicable settlement of their dispute. He is guided by the
principles of objectivity, fairness and justice, giving consideration to, among other
things, the rights and obligations of the parties, usages of the trade concerned and
the circumstances surrounding the dispute, including any previous business
practices between the parties.
CONCILIATION PROCESS :
The conciliator, upon his appointment calls upon the parties to present a written
summary of their respective cases together with any relevant documents. After

going through the summary of the case filed by each party, the conciliator holds a
joint meeting with the parties where each party makes a brief oral presentation of
its case. Thereafter, the conciliator holds private meetings with each party
separately to further clarify its case and to discuss the merits of the case, guiding
the party in respect of the legal position and the requirements to substantiate the
claims. While doing so, he always tries to bring the parties closer to an agreement.
Where the parties are so inclined he may even suggest a settlement for acceptance
by the parties. If the conciliator receives factual information from the party, he
discloses the substance of that information to the other party so that it may have an
opportunity to present its explanation, if any. When a party gives any information to
the conciliator subject to the condition that it be kept confidential, the conciliator
shall not disclose that information to the other party. There may be several rounds
of such separate meetings. If the conciliator is of the view that there is no scope for
agreement between the parties or where the parties or any one of them indicates
its unwillingness to pursue conciliation, the conciliator terminates the proceedings.
Where the parties reach an agreement of settlement, the conciliator holds a final
joint sitting for drawing up and signing a settlement agreement by the parties. The
parties to such an agreement are bound by the settlemernt. Once the settlement
agreement is signed it is final and binding on the parties. Where settlement is
reached during the pendency of the arbitral proceedings involving the same dispute
and the law so provides, the settlement agreement can be enforced in the same
manner as an arbitral award on agreed terms. The conciliator and the parties keep
all matters relating to the conciliation proceedings confidential. They may treat the
settlement agreement also confidential except where its disclosure is necessary for
the purposes of implementation and enforcement. As a principle inherent in
conciliation process, the conciliator and the parties are bound by certain discipline.
Unless all the parties otherwise agree, the conciliator is estopped from acting as an
arbitrator or as a representative of a party in any arbitral, judicial or other
proceedings in respect of a dispute which is or has been subject matter of
conciliation proceedings in which he acts as conciliator. The conciliator cannot also
be presented by a party as witness in any such proceedings. Similarly, the parties
are estopped from relying on or introducing as evidence in arbitral, judicial or other
proceedings - (i) views expressed or suggestions made by the other party in respect
of a possible settlement of the dispute; (ii) admissions made by the other party in
the course of the conciliation proceedings; (iii) proposals made by the conciliator;
(iv) the fact that the other party had indicated his willingness to accept a proposal
for settlement made by the conciliator. Where the confidentiality and discipline
referred to above are not protected by the law, the parties may enter into
contractual arrangement for that purpose. The parties may initiate conciliation even
during the pendency of any Court or arbitration proceeding concerning the same
dispute, without prejudice to their respective stand in those proceedings. If such
conciliation succeeds they report to the Court or the arbitral tribunal, as the case
may be, which may pass decree/ arbitral award in terms of such settlement.

PRE-REQUISITES FOR CONCILIATOR :A conciliator is employed by the disputing parties to act as catalyst for better
communication and problem solving. The conciliator is a person permitted by the
parties to assist and empower them to reach their own lasting settlement.
Therefore, the position of a conciliator requires fundamental abilities to act as such.
(i)

Building Trust Engaging a conciliator by the parties to assist them in

reaching a settlement does not necessarily imply at the outset that the
parties trust the conciliator or the process. Hence one of the most
important ability required of a conciliator is to earn the trust of the parties.
The building of an atmosphere of mutual respect and trust in the
conciliation process, conciliator and between parties, is the key to
successful conciliation. The openness and honesty of the parties enhances
the chances of the success of conciliation. Since the openness requires
trust, the building of trust depends upon the conciliators ability,
competence, consistency, integrity and neutrality at every stage of
conciliation process.

(ii)

Impartiality and Neutrality There are following two absolute pre-requisites

for a valid conciliation process. (a) Impartiality The conciliator must ensure
that he has no interest in the ultimate outcome of the conciliation,
because he is never a biased person. And it is required of him that he
reinforced impartiality by his behaviour at every stage of the process. (b)
Neutrality Neutrality refers to the conciliators behaviour and attitude
during the whole process and the relationship between him and the
parties. The indication of any relationship between conciliator and any of
the parties disqualifies him from accepting the role of conciliator. The
neutrality during the process requires conciliator to ensure that equal
treatment is always accorded to the parties. However, neutrality does not
deny the conciliator to have personal opinions, which are
inevitable.Hence, an impartial attitude and the ability to be neutral
denotes that the conciliator is able to separate his personal views about
the dispute and its outcome from the viewpoints of each of the parties and
is able to concentrate exclusively upon assisting the parties towards
settlement without overtly favouring one over the other. In this context it
may be said that the consistant display of neutrality goes a long way in
encouraging parties to move towards an agreement, as it helps create an
environment of mutual trust, clarity and non-defensiveness.

(iii)

Control of the Process Conciliator must have ability to exercise control of

the process at every stage. The control requires conciliator to strike a

balance and allow parties the freedom to fully express their case,
associated feelings and preserving conducive atmosphere for
negotiations. Although it is required of the conciliator not to jump in to
stop aggressive interactions between the parties, particularly at the initial
stages, yet there may be situations when parties are displaying such
hostile behaviour that prevent them from moving any further towards
settlement, in such situations the conciliator is required to act very
tactfully by bringing the parties back on the settlement track. (iv)
Flexibility and Adaptability Acting as conciliator is not at all an easy task
and to accomplish this task, he has to be adaptable and flexible. The
adapatability in relation to conciliation process requires conciliator to
adapt appropriately to changing events and act suitably. There is no
straight jacket formula to be followed in conciliation and here lies the
advatange of conciliation process as it can be customised by the
conciliator to fit the needs of the participants.

Costs of Conciliation:After termination of conciliation proceedings the Conciliator fixes the cost of
proceedings and gives written notice to the parties. Section 78(2) of the Act
specifically defines the costs as reasonable cost relating to fee and expenses of
conciliator and witnesses and expert advice requested by the conciliator with the
consent of the parties. The costs also include the cost charged by the institution for
appointing conciliator or arranging administrative assistance to facilitate the
conduct of the conciliation proceeding in accordance with section 64 or section 68
of the Act.
POST CONCILIATION ROLE OF CONCILIATOR/INSTITUTION :Generally, the termination of the mediation/conciliation and the recording of the
settlement agreement signifies the conclusion of the mediators role. However, it is
possible that the mediator, or the ADR institution which arranged the mediation
may be asked by the parties to function in relation to the implementation of the
settlement terms. The parties may wish the mediator or the ADR institution to act
as a stockholder in relation to fund to be released on agreed terms or to hold
documents pending the implementation of the settlement. The parties may also
agree that any dispute which may arise in the course of execution of settlement
agreement will be referred to mediation.

CONCLUSION:The development of Alternative Dispute Resolution (ADR) has its principal origins in
the dissatisfaction of people with the way in which the disputes are traditionally
resolved. One of the motivations for ADR is commonly said to be the empowerment
of the individual. Under the traditional process, dispute resolution is generally in the
hands of lawyers, who use procedures and reasoning to resolve the issues for the
parties, whereas, ADR processes tend to help with the empowerment of individuals
giving them responsibility for the resolution of their own issues.

REFERENCES:1. Arbitration and Conciliation Act, 1996.

2. Code of Civil Procedure (Amendment) Act, 1999.
3. 176th Report of the Law Commission of India
. 4. 124th Report of the Law Commission of India on the High Court Arrears - A Fresh
Look (1988).
5. 129th Report of the Law Commission of India on the Urban Litigation - Mediation
as alternative to Adjudciation (1988).
6. Report of Justice Malimath Committee on Alternative Modes and Forums for
Dispute Resolution.
7. Background Paper on International Seminar on Globalisation and Harmonisation
of Commercial and Arbitration Laws, organised by the Indian Council of Arbitration
on March 31, and April 1,1995 at New Delhi.
8. Alen Redfern and Martin Hunter, Law and Practice of International Commercial
Arbitration (1991).
9. Alen Gutterman & Robert Brown, Commercial Laws of East Asia (1997),
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Standing Committee of the National Peoples Congress of the Peoples Republic of
China (1997).

11. Ronald Bernstein, Hand book of Arbitration Practices 1986.

12. Henry Brown & Arthur Mariott, ADR - Principles and Practices (1993).
13. S K Roy Chowdhary & H K Saharay, Law of Arbitration and Conciliation (1996).

14. George R Delaume, Transnational Commercial Arbitration. In the Digest of

Commercial Laws of the World (1982).
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21. V S Deshpande, The Applicable Law in International Commercial Arbitration 31,
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