ARBITRATOR ACTING AS A CONCILIATOR AND VICE VERSA
TABLE OF CONTENTS TABLE OF CASES 2 INTRODUCTION 3 Alternate Dispute Resolution: A Repartee to the Shortcomings of Judicial Proceeding? Arbitration and Conciliation: Different Branches of the Same Tree The Distinction between Arbitrator and a Conciliator The Emotional Aspect
RESEARCH METHODOLOGY 7 THE LETTER OF THE LAW 8 Arbitrator as Conciliator Conciliator as Arbitrator
ARBITRATOR AS CONCILIATOR 10
The Modus Operandi for Conciliation in Arbitral Process Manners of Indicating Willingness to Settle in Arbitral Proceedings Doesn’t the principle of “once a conciliator always a conciliator” hold in the case of failed arbitrations? What if the conciliation resorted to, fails? Why would arbitrating parties resort to conciliation proceedings? What is the manner in which Arbitratorturned Conciliator must conduct conciliation proceedings? A Code of Conduct for ArbitratorturnedConciliators Benefits of Leaving Open the Conciliation Option in Arbitration Can an Arbitral Tribunal object to the parties resorting to Conciliation proceedings?
UNCITRAL SUGGESTIONS ON THE STANCE OF ARBITRATING PARTIES INTERESTED IN SETTLEMENT 17 Dealing with the Possibility of a Settlement Manner of Informing the Arbitration Tribunal of settlement intentions
CONCILIATOR AS ARBITRATOR 18
Nondisclosure by arbitrator of information which was received in the capacity of a conciliator Divergent Views on the Conciliator acting as Arbitrator: East v. West and the Kaplan Formula
A COMPARATIVE STUDY OF INTERNATIONAL LEGAL SYSTEMS ON THE SUBJECT 21 Chinese Position Japanese Position HongKong Position Korean Position German Position Australian Position Canadian Position Brazilian Position WIPO Position
HYBRID FORMS OF ALTERNATE DISPUTE RESOLUTION WHERE THIRD PARTY PERFORMS MULTIFACETED ROLE 26 MEDARB (Mediation Arbitration) MEDOLA
THE POSITION OF THE NATIONAL INSTITUTE FOR ALTERNATIVE DISPUTES RESOLUTION 27 IN CONCLUSION 28 BIBLIOGRAPHY 30
TABLE OF CASES
v. Chaman Paswan, AIR 1954 SC 340, 342.
M/s Jagat Ram Trehan and Sons, AIR 1996 Del 191.
Ransingh v. G.A. Cooperative Societies, AIR 1976 P&H 94.
Tomlin v. Standard Telephones and Cables,  1 WLR 1378.
Alternate Dispute Resolution: A Repartee to the Shortcomings of Judicial Proceeding? The relationship between public frustration stemming from the court-based judicial process and the growth and preference accorded to Alternate Dispute Resolution1 processes is directly proportional. In a world of commerce where time is more than just money, long drawn out court battles are certainly not favored. Thus in many ways the ADR mechanisms have been nurtured by preying on the deficiencies of the existing dynamic. Though the purpose of ADR is of course amicable dispute resolution, the ways of achieving that are not restricted in singularity. Depending upon the nature of the dispute, the context in which arises and any prior agreement as regards resolution of the same the disputants can opt for Arbitration or Mediation or Conciliation (the latter two being considered one and the same in many jurisdictions).2 Disputants may prefer these modes of dispute resolution for the following reasons: Expediency of these alternate processes (though delays in the same are casting doubt on the veracity of this assertion) Avoidance of unnecessary procedural shenanigan Better financial cost-benefit ratios (again in dispute since arbitration costs are on the up) Preservation of good relations among parties that deal with each other frequently Privacy of the dispute resolution (especially in the case of mediation and conciliation)
Hereinafter referred to as “ADR”. Over a period of time and in accordance with various customary practices followed all over the world several hybrid forms of alternate dispute resolution have been crystallized and these shall be dealt with later in detail. 2
Arbitration and Conciliation: Different Branches of the Same Tree Arbitration and conciliation are quite often assigned hierarchical positions with the former heading the latter. The basis for this is usually the binding force of the decision arrived at. Conciliation is a non-binding procedure in which an impartial third party (“the conciliator”) assists the disputants in reaching a mutually satisfactory and agreed settlement of the dispute whereas Arbitration is a procedure in which a dispute is submitted to an “Arbitral Tribunal” (like a bench of decision makers) which gives a decision (“the award”) on the dispute that is binding on the parties. Therefore in conciliation it is not the decision of the conciliator which is required or of any binding value but the settlement arrived at which may be enforced as contract while in arbitration the arbitrator decides.3
The Distinction between Arbitrator and a Conciliator Unlike an arbitrator, a conciliator does not give a decision but his main function is to induce the parties themselves to come to settlement. An arbitrator is expected to give a hearing to the parties, but a conciliator does not engage in any formal hearing, though he may informally consult the parties separately or together. The arbitrator is vested with the power of final decision and in that sense it is his contribution that becomes binding. In contrast, a conciliator has to induce the parties to come to a settlement by agreement.4 To depict it:
Arbitration PARTY A
PARTY B ARBITRATOR
Report of the Secretary General on Settlement of Commercial Disputes, A/CN.9/WG.II/WP.108 14 January 2000, < http://www.uncitral.org/english/sessions/wg_arb/wp-108.pdf> visited on 7/05/2000. 4 Chandra, Sarvesh, “ADR: Is Conciliation the Best Choice?” in Rao, P.C. & Schefield, William, Alternate dispute Resolution: What it is and how it works, Universal Book Pub: Delhi, 1997, p.82.
Conciliation PARTY A
The Emotional Aspect
An arbitrator generally decides after a contest between the parties while in the case of conciliation the final result depends on the will of the parties. Therefore, at the end of the proceedings, emotional harmony between the parties may not suffer much, in the case of conciliation.
RESEARCH METHODOLOGY The object of this research paper is to examine the possibility of an arbitrator taking up the mantle of a conciliator for the same proceedings and vice versa. This paper does not seek to address other unrelated issues pertaining to conciliation and arbitration unless having incidental influence on the subject of research. The paper includes comparative analysis of this proposition in the context of international legal systems and also examines the context in which such a proposition was formulated. Thus this paper relies on the following sources of information: 1. Indian Legal Texts 2. Foreign Legal Texts 3. Documents and texts of the UNCITRAL 4. Discussions of Eminent International Jurists on the Issues 5. The Letter of the Law The limitations encountered during the conduct of research for this paper were the paucity of Indian commentary on sections 30 and 80 of the Indian Arbitration and Conciliation Act, 1996. As regards the latter section most commentators do not feel the need to examine the section and dismiss the legal mandate as being “self explanatory”. No one transgresses beyond the stated position of the law. Therefore a lot of thought was given to the possible interpretations of the sections and reliance placed on discussions of the UNCITRAL. The methodology employed is substantially analytical with an emphasis of relative positions in the other legal systems. The manner of footnoting is uniform.
THE LETTER OF THE LAW
Arbitrator as Conciliator The relevant provisions 30(2) and 30(4) of the Indian Arbitration and Conciliation Act of 1996 are based on section 30 of UNCITRAL model law. The section provides that even if agreement does not authorise the arbitral tribunal to encourage and allow settlement the Act does.5 Therefore two situations can arise : a) if the parties are not authorised by agreement to engage in conciliation then they may be encouraged to settle b) if the parties are authorised then besides encouraging settlement parties may resort to mediation and conciliation
Conciliator as Arbitrator Section 80 precludes the conciliator from acting as arbitrator or as a representative or counsel of a party in any subsequent Arbitral or judicial proceeding relating to the dispute that was the subject matter of the conciliation proceedings. This is intended to prevent any prejudice that may be caused to a party by disclosure of any information or knowledge that the conciliator may have acquired in the course of conciliation proceedings. This section corresponds to Art.19 of the UNCITRAL conciliation rules of 1980. Nor can the conciliator be presented as a witness in any of the arbitral proceedings (s.75 and 81) which could later occur. However it is left to the parties concerned to decide between themselves whether the conciliator can so act. Thus by agreement the conciliator can be given the power to act as arbitrator in a successive arbitration.6 5
Ransingh v. G.A. Cooperative Societies, AIR 1976 P&H 94, Kiran Singh v. Chaman Paswan, AIR 1954 SC 340, 342, M/s Jagat Ram Trehan and Sons, AIR 1996 Del 191 c.f Rao, P. Chandrasekhara, The Arbitration and Conciliation Act 1996: A Commentary, Universal Law Publications: Delhi, 1997, p.99. 6
Venugopal, K.K., Bachawat, B.K. and Singh, Mahinder, Law of Arbitration and Conciliation, 3rd Edn., Wadhwa: Nagpur, 1999, p.1064.
Section 77: Toothless tiger? S.77 provides a strict direction that even the parties may not resort to arbitral proceedings during the conciliation process unless the party is of the opinion that his rights are likely to be prejudiced unless such arbitral proceedings are not resorted to. However since this section is subject to the “opinion of the party” it is quite toothless in preventing the consensual resort to arbitration by disputant parties.
ARBITRATOR AS CONCILIATOR
The Modus Operandi for Conciliation in Arbitral Process The law and practice encourage the use of conciliation (mediation) in arbitration. This is evident in the wording of section 30. If both parties in the process of arbitration voluntarily seek conciliation or agree to conciliation when consulted by the arbitration tribunal (which is possible under the mandate of section 30 of the new Act), the arbitration tribunal shall conduct conciliation at any time before an arbitration award is rendered. This is what is called the use of conciliation in arbitration and where the arbitrator steps into the shoes of a conciliator. If conciliation is unsuccessful, arbitration proceedings will be continued as before. If conciliation leads to a settlement between the parties, the arbitration tribunal will make an arbitration award in accordance with the contents of the settlement under section 31 of the Act. Such an arbitral award has the same binding effect as an award arising out of proper arbitral proceedings.7
Manners of Indicating Willingness to Settle in Arbitral Proceedings In the course of arbitral proceedings parties may desire to settle and may make settlement offers in the form of letters. They may either want the arbitrator to be aware of such offer or quite the contrary in order to prevent the arbitrator gauging the admission of liability by one party. There are essentially two main types of offers:
Markanda, P.C., Law relating to Arbitration and Conciliation, 2nd Edn., Wadhwa: Nagpur, 1997, p.287
a) without prejudice offers that make it possible for a party to make an offer of compromise free from the fear that it will be brought to the attention of the judge or arbitrator and might cause him to draw inferences adverse to the offeror. Neither party should bring either the existence or the contents of the offer to the attention of the arbitrator in any way. Offers which are not prejudicial to the offering party’s position are not privileged, for example, a threat to wind up the company instead of paying the debt is not a without prejudice offer and can be disclosed to the tribunal even if in a without prejudice envelope. The tribunal may then draw an adverse inference thus this serves as a deterrent for parties not to make patently adverse offers. b) Open Offers are admissible as evidence and can be used to put pressure, show unreasonableness of the other party, may be concessions of weakness etc.8 An arbitrator should face the fact that open letters are likely to come to his attention, and he should not seek to rule them inadmissible or refuse to read them. He should always have a keen eye for an amicable resolution of the dispute, and if the consequence of his becoming acquainted with open offers is that he feels embarrassed or under pressure, that is something he should be willing to accept. He should always be prepared to suggest to the parties that they should seriously considering compromising any part of the dispute. The latter is an obligation under s.30 of the new Act with emphasis on the word “encourage”.
Doesn’t the principle of “once a conciliator always a conciliator” hold in the case of failed arbitrations?
Bernstein, R., Tackaberry, T. and Marriot, A.L., Handbook of Arbitration Practice, Sweet and Maxwell: London, 1998, p.156.
Though section 30 seems to be clear on the point of the arbitrator turning to conciliation to arrive at a settlement it does present an interesting issue. The issue is that when an arbitrator turns to conciliation and the conciliation fails and arbitral proceedings are reverted to then doesn’t that present a case of conciliator turning into arbitrator, which in the absence of a special agreement is prohibited by section 80(2)? In my opinion when an arbitrator turns into a conciliator under s.30 by agreement of the parties he is a “conciliator” for the purposes of the prohibition under s.80. The only way then to save the situation is to argue that the agreement to opt for conciliation under s.30 also serves as an agreement under s.80 for the conciliator as arbitrator. With this interpretation there is consistency in the working of the two sections. Whether the courts accord this interpretation remains to be seen. Also the law provides a safeguard against adverse affects of a conciliators knowledge in arbitral proceedings by providing that should conciliation conducted by the arbitration tribunal fail, no statements, opinions, views or proposals which have been made, raised, put forward, acknowledged, accepted or rejected by either party or by the arbitration tribunal in the process of conciliation can be evoked as grounds for any claim, defence and/or counter-claim in the arbitration 9 proceedings. This can be inferred by a reading of the provisions of section 81(b) of the Act.
What if the conciliation resorted to, fails?
Also see UNCITRAL Report of the Working Group on Arbitration on the work of its thirty-second session (Vienna, 20 – 31 March 2000), < http://www.uncitral.org/english/sessions/unc/UNC-33/acn9468.pdf> visited on 11/05/2000. In this report the issue of admissibility of evidence gathered during the conciliation process is discussed in detail.
The arbitration tribunal may terminate conciliation and continue the arbitration proceedings when one of the parties requests a termination of conciliation or when it believes that further efforts to conciliate will be futile.10 However my previous submission on the issue of arbitrator turning to conciliator and then back to arbitrator needs to be kept in mind and the agreement under s.30 should address such a dilemma.
Why would arbitrating parties resort to conciliation proceedings? Normally, there are three stages in the process of arbitration: 1. the stage of finding and establishing facts; 2. the stage of applying the law, the terms of the contract, the trade usage and the principle of fairness and reasonableness (equity) on the basis of the facts found at the first stage to distinguish the liabilities between the parties; and 3. the stage of discussing and deciding the case by the arbitration tribunal. Very often, at the end of the first stage or in the middle of the second stage, the parties become aware of "where they are" and voluntarily ask the arbitration tribunal to conciliate the case. Or, the arbitration tribunal finds a possibility of resolving the case by conciliation and takes the initiative to ask the parties whether they are willing to settle their dispute through conciliation to be conducted by the arbitration tribunal. Both of the options are made available by the provisions of section 30. If the responses from the parties are positive, the arbitration tribunal will commence the conciliation proceedings during the arbitration proceedings.
Section 76(d) of the new Act provides for such termination provisions.
What is the manner in which Arbitratorturned Conciliator must conduct conciliation proceedings? The arbitration tribunal may conduct the conciliation proceedings in three ways: 1. the arbitration tribunal consults with both of the parties together; 2. the arbitration tribunal consults with each of the parties separately; and 3. the parties consult each other themselves.11 These three ways can be used alternatively. In the course of conciliation, the arbitration tribunal must carefully and patiently listen to the statements and arguments of the parties and rigidly examine their evidence. The arbitration tribunal must explain the case to the parties from the legal point of view as well as from the business (relationship) point of view so as to bring about mutual understanding and mutual concession between both parties. One very important point is that the parties should never be put on adversary positions but on friendly and cooperative positions; otherwise, the arbitration tribunal as a conciliator will get nowhere and the conciliation efforts will be futile. Sometimes some lawyers who are not quite familiar with conciliation may constitute obstacles on the way to reaching a settlement. Therefore, it is always helpful for the arbitration tribunal to find a way to get round those lawyers who may become obstacles and talk to the managers (executives) of the parties directly, particularly at the crucial and decisive moment. Absence of legal arguments is not good for conciliation but too many legal arguments are equally not good and even bad for conciliation. Reasonably sufficient legal arguments are good enough. The arbitration tribunal should never let things go to the extreme when conciliating a dispute.12 11
See Generally Supra n.8. UNCITRAL Report on Conduct of Conciliation Proceedings, http://www.uncitral.org/english/sessions/unc/UNC-33/acn8-428.pdf visited on 5/05/2000. 12
A Code of Conduct for ArbitratorturnedConciliators When conducting conciliation, the arbitration tribunal in is required to: 1. respect the free will of the parties; 2. find out the facts of the case, distinguish right from wrong between the parties and determine the liabilities of the parties while abide by law, adhere to the terms of the contract, follow international practice and observe the principle of fairness and reasonableness (equitable principle); and 3. examine the evidence submitted by the parties. The arbitrator-turned-conciliator’s sitting on the arbitration tribunal must be absolutely objective and impartial and prove themselves really objective and impartial in all respects in their conduct of conciliation proceedings; otherwise, they will lose their "authority" and forfeit the parties’ confidence in them. They must also prove themselves to be professionally knowledgeable, technically skillful and even psychologically strong in conducting conciliation; otherwise, they can not convince the parties and lawyers in particular. They must be strict in applying law, sympathetic in feeling and flexible in tactics. Impatience is ethically prohibited.
Benefits of Leaving Open the Conciliation Option in Arbitration Combining arbitration and conciliation has, among others, the following advantages: 1. saving one procedure (separate conciliation procedure) in reality; 2. less expensive, saving money, time, human energy, etc.; 3. higher successful rate of conciliation; and 4. enforceable outcome.
Can an Arbitral Tribunal object to the parties resorting to Conciliation proceedings?
Interestingly the above issue was the subject of contest in the UNCITRAL prior to the adoption of the UNCITRAL Model Law on International Commercial Arbitration. A proposal was made to delete the term “and not objected by tribunal” (the phrase finds it’s place in section 30 of the new act) arguing that if the parties have decided to opt for conciliation why should the tribunal interfere? A successful reply to this drew a distinction between the parties’ right to settle and their right to have the settlement recorded as an award signed by the tribunal. The logic employed was that in a settlement resorted to the terms may not meet entirely the approval of the tribunal and yet the tribunal would have to record the settlement as an award under s.31. Why should tribunal affix it’s approval to the award especially when the settlement comprising it is opposed in some ways to policy or fairness though perfectly fine between the parties?13 Thus the tribunal retains the rarely exercised right to object to the resort to conciliation proceedings. Of course, the parties then have the adoption to either terminate the services of the tribunal and appoint a professional conciliator or come to a settlement that is in conformance with the tribunals notion of policy.
Excerpts from “REPORT OF THE UNCITRAL ON THE WORK OF IT’S 18 TH SESSION” PROVIDING AN ACCOUNT OF THE DELIBERATION OF THE COMMISSION LEADING TO THE ADOPTION OF THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (UN DOC A/40/17, 21 AUG 1985).
UNCITRAL SUGGESTIONS ON THE STANCE OF ARBITRATING PARTIES INTERESTED IN SETTLEMENT
Dealing with the Possibility of a Settlement The parties may adopt two different positions, a) May want to keep settlement plans away from the arbitration and may not want tribunal to know. b) May want arbitrator to know but there are again two variations as regards for what purpose they desire the tribunal to know: I. only to take into account for the purposes of the scheduling of the arbitration proceedings so that the proceedings are not defunct in light of the settlement II. may want arbitrator to get into the settlement discussion. Thus they are comfortable with the prospect of the arbitrator and stepping into the shoes of the conciliator and if the latter fails revert back to arbitrator
Manner of Informing the Arbitration Tribunal of settlement intentions Parties may either inform the arbitrator of: a) Whether discussions have take place, without mentioning terms (usually for the purpose of scheduling and not for the purpose of getting the arbitrator involved) b) Whether parties are willing to engage in conciliation with tribunal as a conciliation panel14
Yearbook of the UNCITRAL, 1994 Vol XXV, p.216.
CONCILIATOR AS ARBITRATOR
The position of law in this regard is explicitly stated in the Act. Section 80 declares that a conciliator cannot act as an arbitrator unless there is an agreement between the parties that permits the same. As mentioned this section is modeled on Art.19 of the UNCITRAL CONCILIATION RULES of 1980.15 This section is also identical to Art.10 of the ICC RULES OF OPTIONAL CONCILIATION.16 Proceeding on this footing we shall now examine the legalese of the jurists who arrived at such a provision and what are the motivating factors for such a position in law. Some jurists reason that it is not good to have the same person to arbitrate the case because he has known everything of the case. Others maintain that it is best to have him to arbitrate the case just because he has known everything of the case.17 The key point is that he must be impartial. The more he knows the case, the more impartial he can be if he is a person who really cherishes impartiality. However such a conclusion is highly personality dependent.
Art 19 says that a conciliator cannot be an arbitrator but that is contractually possible if the parties not uncomfortable with the knowledge of now arbitrator; c.f. EXCERPTS FROM “REPORT OF THE UNCITRAL ON THE WORK OF IT’S 18 TH SESSION” PROVIDING AN ACCOUNT OF THE DELIBERATION OF THE COMMISSION LEADING TO THE ADOPTION OF THE UNCITRAL MODEL LAW ON CONCILIATION (UN DOC A/35/17, JULY 1980) 16 (1/1/1968). 17 Houzhi, Tang, “Use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/tang.html visited on 11/05/2000.
The law takes the easy way out by providing in fact that if the parties are confident of the impartiality of the conciliator turned arbitrator then by agreement they can bypass the prohibition under s.80 of the new Act. If there is no such agreement then the conciliator cannot on his own volition play a part in any subsequent arbitration or for that matter judicial proceedings against the other party. The logic is that if you trust the conciliator to be impartial with all the personal information that he has received then you can allow him to be arbitrator in the same dispute, otherwise you can’t. Thus the question boils down to “Is it good to have the same person who has known everything of the case to arbitrate the case?” and the answer depends entirely upon the equation of the parties with the conciliator.
Nondisclosure by arbitrator of information which was received in the capacity of a conciliator In conciliation proceedings, the parties typically express suggestions and views regarding proposals for a possible settlement, make admissions or indicate their willingness to settle. If despite such efforts the conciliation does not result in a settlement and a party initiates judicial or arbitral proceedings, those views, suggestions, admissions or indications of willingness to settle might be used to the detriment of the party who made them. This possibility of “spillover” of certain facts that occurred during conciliation may discourage parties from actively trying to reach a settlement during conciliation proceedings, which may greatly reduce the usefulness of conciliation. In order to address the above problem, article 20 of UNCITRAL Conciliation Rules incorporated in Section 81 of the new Act provides for inadmissibility of the above sort of evidence. Therefore even if the parties agree to the conciliator being presented in subsequent judicial and
arbitral proceedings (s.80(b)) even then the conciliator cannot depose as to any evidence under s.81.
Divergent Views on the Conciliator acting as Arbitrator: East v. West and the Kaplan Formula There is a long history of conciliation in Asia particularly in China, where arbitration and conciliation are considered part of the same organic process. The Chinese see the conciliator who is aware of the needs and motivations of the parties, as the ideal arbitrator when the parties are unable to resolve their dispute voluntarily. In their view there is no need, in fact, a lost advantage to have different people serve as conciliator and arbitrator. India on the other hand seems to have adopted the western approach by incorporating Art.19 of the UNCITRAL Conciliation Rules which are pro the arbitrator not be conciliator stand unless specifically agreed. In the West, however, conciliation and arbitration are viewed as two very different procedures. It is unthinkable that an arbitrator, in the course of his or her arbitration, would switch hats to act as a conciliator and, should the attempt at conciliation fail, continue with the arbitration. Parties would be reluctant to put all their cards on the table before a conciliator knowing that the same person may, in the end, arbitrate their dispute. In striking a balance between the two ideologies renowned Professor Neil Kaplan endorses the combination of the two procedures but adds the following conditions to ensure natural justice: 1. The combination is subject to the agreement of the parties (mandate of sections 30 and 80); 2. Conciliation proceedings cease once the parties withdraw their consent (agreement); and 3. Should the efforts at conciliation fail, all material facts discovered in the proceeding must be disclosed.18 18
A COMPARATIVE STUDY OF INTERNATIONAL LEGAL SYSTEMS ON THE SUBJECT In reviewing the comparative position of international legal systems on the issue in question the comparison has been restricted to the nations of commercial importance.
Chinese Position In CIETAC (China International Economic and Trade Arbitration Commission) arbitration in China, conciliation has been conducted by the CIETAC arbitrators during arbitration proceedings in almost 50% of the cases under their cognizance. The successful rate is 40-50%. No complaint and dissatisfaction can be traced from the parties and their lawyers who have participated in the combination process.19
Houzhi, Tang, “Use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/tang.html visited on 11/05/2000.
Japanese Position The Rules of the Japan Commercial Arbitration Association stipulate that the arbitral tribunal may, when it deems it necessary and upon obtaining the consent of the parties, cause one or more of the arbitrators constituting the arbitral tribunal to mediate/conciliate a settlement. The Rules of Maritime Arbitration of the Japan Shipping Exchange, Inc. also encourage the use of conciliation in arbitration. Section 21 of the Rules stipulates: 1. the parties do not loose their respective rights to settle the dispute amicably even after the application for arbitration has been filed. 2. the Board may, at any stage of the arbitration proceedings, mediate between the parties for the whole or a part of the dispute. In fact, the maritime arbitration in Japan, more cases which are referred to arbitration are settled by mediation in the process of arbitration than proceed to a final award.20
Hong Kong Position The Hong Kong Arbitration Ordinance gives the parties the option of letting the arbitrators interrupt the arbitration and attempt to conciliate the dispute. The procedure requires the agreement of both parties and, once started, can be terminated upon the request of either party. The arbitrator-turned-conciliator is permitted to have confidential discussions with each party. Should the effort at conciliation prove unsuccessful, the conciliator will resume the role of arbitrator and all material information given in confidence have to be disclosed. The Ordinance erects a framework that allows an arbitrator to conciliate a dispute without fear of committing misconduct by breaching the rules of natural justice. 20
Maeda, Norhiko, “ADR in Japan”, http://www.jcaa.or.jp/jcaa-j/jigyou/textadrinjapan.html visited on 11/05/2000.
Korean Position The Korean Commercial Arbitration Board in Seoul endorses the combination of arbitration and conciliation in the following way: 1. After acceptance of the request for arbitration, the Secretariat shall, upon the conciliation request of both parties within 15 days in case of domestic arbitration and within 30 days in case of international arbitration from the Basic Date, attempt to settle the dispute by conciliation proceedings without recourse to taking the step of arbitration proceedings. 2. The conciliation proceedings shall be followed by one or more conciliators appointed by the Secretariat from among those on the Panel of Arbitrators in such manner as the conciliator(s) think(s) it appropriate. 3. If the conciliation succeeds in settling the dispute, the conciliator(s) shall be regarded as the arbitrator(s) appointed under the agreement of the parties; and the result of the conciliation shall be treated in the same manner as such award as to be given and rendered upon settlement by compromise under the provision of Article 53, and shall have the same effect as award. 4. When the conciliation fails to settle the dispute within 30 days after the appointment of conciliator(s), the conciliation procedure shall come to an end and the arbitration procedure under these Rules, inclusive of appointment of arbitrator(s), shall be immediately resumed.
German Position The German Rules oblige the arbitral tribunal to seek amicable settlement of the dispute or a part of the dispute at every stage of the arbitration proceedings.21
Australian Position 21
“WIPO Discussion on use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/discussion4.html visited on 11/05/2000.
The Australian Arbitration Act expressly endorses the use of conciliation/mediation in arbitration. It stipulates that: (1) Unless otherwise agreed in writing by the parties to an arbitration agreement, the arbitrator or umpire shall have power to order the parties to a dispute which has arisen and to which that agreement applies to take such steps as the arbitrator or umpire thinks fit to achieve a settlement of the dispute (including attendance at a conference to be conducted by the arbitrator or umpire) without proceeding to arbitration or (as the case requires) continuing with the arbitration. (2) Where (a) an arbitrator or umpire conducts a conference pursuant to sub-section (1); and (b) the conference fails to produce a settlement of the dispute acceptable to the parties to the dispute No objection shall be taken to the conduct by the arbitrator or umpire of the subsequent arbitration proceedings solely on the ground that the arbitrator or umpire had previously conducted a conference in relation to the dispute.
CanadianÂ Position The Canadian Arbitration Bill supports the combination of arbitration and conciliation and stipulates: (1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. (2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.
(3) An arbitral award on agreed terms shall be made in accordance with Section 31 and shall state that it is an arbitral award. (4) An arbitral award on agreed terms has the same status and effect as any other arbitral award on the substance of the dispute.
Brazilian Position In Brazil we have the experience that, when the people know that the mediator can exercise functions that are arbitral, they do not tell all the truth, because they know that the truth can be used against them. We feel that sometimes it is difficult when people know that the mediator will be the judge or arbitrator. I do not know the situation in other countries and I know that the culture in Brazil is very, very different from China. But, in Brazil, people would not become very deeply involved in the mediation if they know that the mediator can act as the arbitrator.22
WIPO Position WIPO expressly supports and endorses conciliation (mediation) in arbitration.23
“WIPO Discussion on use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/discussion4.html visited on 11/05/2000. 23 WIPO Mediation Rules and WIPO Arbitration Rules. The following rules and laws endorse the abovesaid permission: UNCITRAL Model Law, French law, Belgian law and rules, the Netherlands law and rules, United States rules, ICC rules, LCIA rules, Swiss rules, Italian rules, Swedish rules, German rules, Russian rules, Austrian rules, WIPO rules, Croatian rules, the Eastern European countries’ rules, Canadian rules, Australian rules, Latin American rules, Hong Kong rules, Singapore rules, Japanese rules, Korean rules, Chinese rules and of course the Indian Law c.f. ibid.
HYBRID FORMS OF ALTERNATE DISPUTE SETTLEMENT WHERE THIRD PARTY PERFORMS MULTIFACETED ROLES In the world of commerce practices and quite often laws evolve to serve better the interests of the parties that consolidate the foundations of commerce. Even in the case of Alternate Dispute Resolution the same has occurred. Below are the various hybrid modes of ADR which combine elements of contemporary methods:
MEDARB (Mediation Arbitration) This is a procedure where the parties agree to settle their dispute first by attempting conciliation within a specified time, failing which by arbitration. Since the parties agree such is not prohibited by Section 80. This is distinct from conciliation in the course of arbitration proceedings where, if the settlement is reached, the arbitration proceedings are terminated by making an award on agreed terms.24
MEDOLA This is a binding procedure where on the failure of the parties to reach a settlement through mediation, the mediator or arbitrator who had induced the settlement process considers the final offers made by the party during mediation and gives a binding judgement on the basis of what he considers just and fair.25 This controversial procedure is often disputed because of allegations of bias. Aggrieved parties often believe that upon consideration of the offers the adjudicator becomes prejudiced towards the party that seems to be reasonable.
Chandra, Sarvesh, “ADR: Is Conciliation the Best Choice?” in Rao, P.C. & Schefield, William, Alternate Dispute Resolution: What it is and how it works?, Universal Book Pub: Delhi, 1997, p.83. 25 Ibid at 85.
THE POSITION OF THE NATIONAL INSTITUTE FOR ALTERNATE DISPUTE RESOLUTION (NIADR)
The NIADR is a specialised centre in the National Law School of India University for promoting and providing efficacious Alternate Dispute Resolution. The NIADR has further, in keeping with the policy of other major Arbitral Institutions, framed it’s own rules for conciliation and arbitration. These rules, though borrowed heavily from the new Act, are pleasantly bereft of unnecessary procedural riders and afford enough flexibility to the tribunal to arrive at a full and final decision. Since the rules of the institute are subject to the mandate of the Act the dual roles of arbitrator and conciliator are treated similarly. Rule 13.4 allows the parties to empower the arbitrator as amiable compositor and Rule 17 of the Rules of Arbitration allow for a settlement to be recorded as an award. Furthermore, Rule 11 of the Rules of Conciliation disallows the conciliator to arbitrator provided there is no agreement between the parties to the contrary.26 It is felt that since there is an academic institution at the helm of affairs of the NIADR the tribunals will be sensitive to the need to promote settlements and well equipped to deal with both conciliation and arbitration.
National Institute for Alternative Disputes Resolution, A Brochure, National Law School of India University: Bangalore, 1999.
INÂ CONCLUSION The least one can say is that the combination of conciliation and arbitration is not an institution of overwhelming originality, since it has been commonly practiced, I think, in all procedures, and under all latitudes. In arbitration, everyone tries at one moment or another to arrive at conciliation. Most of the legal systems of the world admit to this practice. Whether you shoot down this proposition with hyper-technical arguments is irrelevant considering a elementary understanding of human behaviour. It is believed that there are many nations whose mentality and culture favours conciliatory processes. Even in the Arab countries or in China, conciliation/mediation is a forerunner to arbitration proceedings. The same is the case in India. In fact, in India there were, during the olden days, the Shrines or the Guilds that decided commercial disputes by informal conciliatory processes. At the time of the UNCITRAL formulations there were essentially two view as regards the dual roles of conciliation and arbitration: View One: Role of conciliator and arbitrator are not incompatible provided the manner of participation in the settlement does affect impartiality in arbitration proceedings. View Two: Participation in conciliation disqualifies arbitrator.27 Eventually everyone agreed that it all boils down to the equation of the parties with the conciliator/arbitrator and thus the phrase â€œunless by agreementâ€?.
Yearbook of the UNCITRAL, 1994 Vol XXV, p.216.
In fact the law is so flexible now that the parties can either decide to approach the arbitrator for settlement or come to an undisclosed settlement to account for the possibility of bias from a failed settlement. It may be a term of the settlement that the bargain remains confidential to the parties. The compromise will then be embodied in a private document prepared by the parties or their lawyers and not disclosed to the arbitrator. It is possible to get a “Tomlin order”28 where the arbitral proceedings are stayed and settlement terms carried into force instead. Finally, what emerges is that the Act does give a lot of latitude to the parties to decide the functionalities of the arbitrator/conciliator. The only difference being that while arbitrator to conciliator is to be encouraged the contrary i.e. conciliator to arbitrator switch is more of an exception which is contrary to as we have seen the case in countries like China.
Tomlin v. Standard Telephones and Cables,  1 WLR 1378 c.f. Srinivasan, K., “The new law on Conciliation”, 21 CLA 37 .
Srinivasan, K., “The new law on Conciliation”, 21 CLA 37 . Houzhi, Tang, “Use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/tang. html visited on 11/05/2000. Maeda, Norhiko, “ADR in Japan”, http://www.jcaa.or.jp/jcaa-j/jigyou/textadrinjapan.html visited on 11/05/2000. “WIPO Discussion on use of Conciliation in Arbitration”, http://www.arbiter.wipo.int/events/conferences/1996/discu ssion4.html visited on 11/05/2000. Chandra, Sarvesh, “ADR: Is Conciliation the Best Choice?” in Rao, P.C. & Schefield, William, Alternate dispute Resolution: What it is and how it works, Universal Book Pub: Delhi, 1997.
Rao, P. Chandrasekhara, The Arbitration and Conciliation Act 1996: A Commentary, Universal Law Publications: Delhi, 1997. Venugopal, K.K., Bachawat, B.K. and Singh, Mahinder, Law of Arbitration and Conciliation, 3rd Edn., Wadhwa: Nagpur, 1999. Markanda, P.C., Law relating to Arbitration and nd Conciliation, 2 Edn., Wadhwa: Nagpur, 1997. Bernstein, R., Tackaberry, T. and Marriot, A.L., Handbook of Arbitration Practice, Sweet and Maxwell: London, 1998.
National Institute for Alternative Disputes Resolution, A Brochure, National Law School of India University: Bangalore, 1999. Yearbook of the UNCITRAL, 1994 Vol XXV, p.216. Report of the Secretary General on Settlement of Commercial Disputes, A/CN.9/WG.II/WP.108 14 January 2000, < http://www.uncitral.org/english/sessions/wg_arb/wp108.pdf> visited on 7/05/2000.
UNCITRAL REPORT OF THE WORKING GROUP ON ARBITRATION ON THE WORK OF ITS THIRTY-SECOND SESSION (Vienna, 20 – 31 March 2000), <http://www.uncitral.org/english/sessions/unc/UNC33/acn9-468.pdf> visited on 11/05/2000. UNCITRAL REPORT ON CONDUCT OF CONCILIATION PROCEEDINGS, http://www.uncitral.org/english/sessions/unc/UNC-33/acn8428.pdf visited on 5/05/2000. REPORT OF THE UNCITRAL ON THE WORK OF IT’S 18 TH SESSION” PROVIDING AN ACCOUNT OF THE DELIBERATION OF THE COMMISSION LEADING TO THE ADOPTION OF THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (UN DOC A/40/17, 21 AUG 1985). EXCERPTS FROM “REPORT OF THE UNCITRAL ON THE WORK OF IT’S 18TH SESSION” PROVIDING AN ACCOUNT OF THE DELIBERATION OF THE COMMISSION LEADING TO THE ADOPTION OF THE UNCITRAL MODEL LAW ON CONCILIATION (UN DOC A/35/17, JULY 1980)
Published on Oct 14, 2010