Arbitration is an alternative dispute
resolution mechanism in which the parties get their disputes settled through
the intervention of a third person and without having recourse to the
court of law. It is a mode in which the dispute is referred to a nominated
person who decides the issue in a quasi-judicial manner after hearing
both sides. For instance, reference of a dispute to 'panch' or 'panchayat'
is a form of arbitration. Generally, the disputing parties refer their
case to an arbitral tribunal and the decision arrived at by the tribunal
is known as an 'award'. Arbitration is used mainly in business sectors
like construction projects, shipping and transportation, patents, trade
marks and brands, financial services including banking and insurance,
foreign collaborations, partnership disputes, etc.
Conciliation is the process of amicable
settlement of disputes by the parties, with the assistance of a conciliator.
It differs from arbitration in the sense that in arbitration the award
is the decision of the third party or the arbitral tribunal while in the
case of conciliation the decision is of the parties which arrive at
with the mediation of the conciliator.
Such modes of dispute resolution have
several advantages over a law suit:- (i) they are less costly than a suit
in a court of law; (ii) they are very simple and more expeditious, saving
the parties from waste of time; (iii) as the proceedings are conducted
in closed doors, the dispute is not publicised ensuring confidentiality;
(iv) the award/decision is generally final because the appeal is permitted
only in certain cases.