Conciliation: How It Works and How It Differs from Mediation

Conciliation sits between mediation and arbitration in how active the neutral's role is. Like a mediator, a conciliator has no power to impose a binding decision. Unlike a mediator, a conciliator can — and often does — put forward specific settlement proposals for the parties to accept, modify, or reject, drawing on the conciliator's own assessment of the dispute's merits.

How conciliation proceeds

1. Initiation. One party sends a written invitation to conciliate; the process begins once the other party accepts.
2. Appointment of the conciliator. Parties may appoint a single conciliator jointly, or each may appoint one conciliator who then jointly appoint a third.
3. Statement of facts. Each party submits a written statement describing the dispute and the points at issue.
4. Conciliation sessions. The conciliator meets with the parties, jointly or separately, and may — at any stage — put forward proposals for settlement, informed by principles of fairness and the parties' own stated interests rather than strict legal rights alone.
5. Settlement agreement. If the parties reach agreement, they sign a written settlement agreement, which the conciliator authenticates.

Where conciliation is mandatory in India

Conciliation is not always optional. Under the Micro, Small and Medium Enterprises Development Act, 2006, a buyer who delays payment to a qualifying micro or small supplier beyond the statutory period can be referred to conciliation before the Micro and Small Enterprises Facilitation Council — a mandatory first step before the dispute can proceed to arbitration under the same Act. This makes conciliation the default entry point for a significant share of India's commercial payment-recovery disputes.

Enforceability

A conciliation settlement agreement is not merely a private contract between the parties — Section 74 of the Arbitration and Conciliation Act, 1996 gives it the same legal status as an arbitral award made on agreed terms. In practice, that means it can be enforced through the courts in the same way a court decree can, without the winning party having to file a fresh civil suit to prove the underlying claim. See [Is a Settlement Binding & Enforceable?] for how this compares with mediation and arbitration outcomes.

When conciliation fits

Conciliation suits disputes where the parties want more active guidance toward a workable number or term than pure facilitative mediation offers, but still want to retain control over whether to accept the outcome — unlike arbitration, where an arbitrator's award binds the parties regardless of whether either side agrees with it.