Difference Between Mediation, Conciliation, and Arbitration in Pakistan

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In an era where court litigation is costly, lengthy, and overburdened, Alternative Dispute Resolution (ADR) mechanisms such as Mediation, Conciliation, and Arbitration have become increasingly important. These methods provide faster, cost-effective, and more flexible solutions to resolve disputes outside the courtroom.

This article explains the difference between Mediation, Conciliation, and Arbitration, their legal framework in Pakistan, and relevant case laws to illustrate their practical application.

Legal Framework in Pakistan

  • Arbitration: Governed under the Arbitration Act, 1940
  • Mediation & Conciliation:
    • Not extensively codified but promoted through:
      • Section 89-A of the Code of Civil Procedure, 1908
      • Small Claims and Minor Offences Courts Ordinance, 2002
      • Alternate Dispute Resolution Act, 2017 (Islamabad Capital Territory)
      • Punjab ADR Act, 2019

1. What is Arbitration?

Arbitration is a formal legal process where disputing parties refer their dispute to a neutral third party (arbitrator), whose decision (called an award) is binding and enforceable by law.

Key Features:

  • Based on a written agreement
  • Binding and enforceable under Section 14 & 17 of Arbitration Act, 1940
  • Arbitration award can be challenged under limited grounds
  • The arbitrator acts like a private judge

Relevant Case Law:

PLD 2013 SC 195 – The Supreme Court held that where parties agreed to arbitration, courts should honor such agreements and avoid parallel litigation.

2. What is Mediation?

Mediation is a voluntary, informal process where a neutral third party (mediator) helps disputing parties reach a mutually acceptable settlement. The mediator does not impose a decision, but facilitates communication and negotiation.

Key Features:

  • Non-binding unless formalized in writing
  • Confidential and flexible
  • Preserves relationships (commonly used in family, business, and community disputes)

Legal Recognition:

  • Section 89-A CPC empowers courts to refer cases to mediation.
  • Punjab ADR Act 2019 allows court-referred or private mediation.

Relevant Case Law:

PLD 2020 Lahore 522 – Emphasized that mediation should be promoted to reduce backlog in courts and encourage settlements.

3. What is Conciliation?

Conciliation is similar to mediation, but the conciliator takes a more active role by suggesting solutions and helping the parties reach a compromise.

Key Features:

  • Informal and flexible
  • The conciliator may propose settlement terms
  • Parties may accept, modify, or reject proposals

While conciliation isn’t extensively codified in Pakistani law, it is recognized in practice and supported by judicial policy to encourage ADR.

Comparison Table

Aspect Arbitration Mediation Conciliation
Legal Basis Arbitration Act, 1940 Section 89-A CPC, Punjab ADR Act, 2019 Judicial encouragement, informal laws
Nature Formal, legal proceeding Informal, voluntary Informal, semi-structured
Role of Neutral Arbitrator gives binding decision Mediator facilitates communication Conciliator suggests solutions
Binding Outcome Yes (Award is enforceable) Only if formalized Only if parties agree
Privacy Confidential Confidential Confidential
Common Use Commercial, property, international deals Family, employment, civil matters Employment, family, business disputes

Enforceability of ADR Outcomes in Pakistan

  • Arbitration Award: Enforceable under Section 17 of the Arbitration Act by filing it in civil court.
  • Mediation/Conciliation Agreement: Can be made enforceable if incorporated into a court decree or mutual contract.
  • Section 21 of Punjab ADR Act 2019 makes settlements binding upon recording them in writing and presenting before court.

Role of Judiciary in Promoting ADR

Pakistan’s superior judiciary has consistently encouraged ADR to:

  • Reduce case backlog
  • Promote amicable settlements
  • Increase access to justice

Judicial Policy:

  • National Judicial Policy 2009 encouraged ADR as an alternative to litigation.
  • Lahore High Court Mediation Centre actively conducts mediations on civil and family matters.

Procedure to Initiate ADR

For Arbitration:

  1. Agreement with an arbitration clause
  2. Appointment of arbitrator
  3. Hearings and evidence
  4. Arbitrator announces award
  5. File award in court under Section 14, Arbitration Act

For Mediation/Conciliation:

  1. Parties agree or court refers case to mediator/conciliator
  2. Sessions held with both parties
  3. Mutual settlement recorded
  4. Can be submitted before court for decree

Relevant Judgments and Statutes

  • Anjuman Intizamia, Jamia Masjid Kalan v. Nisar Ahmad, 1985 SCMR 1203: Reinforces the importance of compromise in resolving disputes, referencing Order XXIII, Rule 3 of the Civil Procedure Code.
  • Messrs J.V. KOCKS KG/Rist v. Government of Pakistan, 1984 SCMR 1543: Highlights the importance of mutual consent and adherence to agreed-upon terms in arbitration proceedings. section 22 of the Arbitration Act (X of 1940) is also applicable
  • Arshad Mahmood and others v. Maqbool Ahmad and others, 1989 SCMR 1739: Emphasizes the importance of amicable settlements and compromises in resolving disputes.
  • Ghulam Hussain Shah v. Ghulam Muhammad, 1991 SCMR 262: Reinforces the judiciary’s role in facilitating and enforcing compromise agreements between parties in dispute.
  • SPECIAL COMMUNICATION ORGANIZATION through Director-General, Rawalpindi Versus Messrs IBELL (PVT.) LTD., LAHORE, 2007 CLC 248: highlights the jurisdictional aspects of arbitration agreements, emphasizing that the location of the agreement’s execution is a significant factor in determining the appropriate court for filing applications related to arbitration. It reinforces the principle that unless explicitly stated otherwise, the courts in the jurisdiction where the contract was executed hold the authority in matters related to the agreement also clarified the harmony between section 2(c) of Arbitration Act and section 20 of Civil procedure code\
  • Liaquat Ullah Khan Khatak and 5 others Versus Hafeez Akhtar and 9 others, PLD 2004 Lahore 312 judgment reinforces the principle that objections to arbitration proceedings must be raised promptly and consistently. It clarifies that participation in arbitration proceedings can estop a party from later contesting the validity of the arbitration agreement
  • ALLIED BANK LTD. Versus SECURITY ORGANIZATION SYSTEM PAKISTAN (PVT.) LTD, 2012 MLD 95: This judgment reinforces the principle that territorial jurisdiction in arbitration matters can be determined by where the cause of action partly arises, impacting how businesses structure their contracts and where they can pursue legal recourse. It clarifies that the location of contract execution and service provision are critical factors in determining jurisdiction under Section 20(c) of the C.P.C.
  • The IMPERIAL ELECTRIC COMPANY (PVT.) LIMITED Versus ZHONGXING TELECOM PAKISTAN (PVT.) LIMITED and others, 2019 CLD 609 The main legal issue was whether clause 19.2 of the agreement constitutes a valid arbitration agreement under Section 34 of the Arbitration Act 1940, warranting a stay of court proceedings.
  • Noor Muhammad and others v. Khan Muhammad and others, 2010 YLR 984 The primary legal issue was whether the arbitration award, agreed upon during the pendency of the suit, could be enforced as a rule of the court, even if initiated without formal court intervention
  • Mubarak Ali v. The Chairman Union Council, 1987 CLC 1661 The primary legal issue was whether the Arbitration Council, acting under the Muslim Family Laws Ordinance, 1961, was limited by the pecuniary jurisdiction of the Conciliation Courts Ordinance, 1961.
  • Itehad Cargo Services v. Rana Rafaqat Ali, PLD 2002 Karachi 420: The primary legal issues were centered on territorial jurisdiction of the court, the effect of an arbitration clause in the partnership agreement, and the validity of an arbitration award not made a rule of the court.
  • Messrs L.P.G. MARKETING COMPANY Ltd. Versus Messrs INDUS GAS COMPANY Ltd, 1986 M L D 1659: The primary legal issue was the appointment of an arbitrator to resolve the disputes between the parties, as per the arbitration clauses in their agreements.
  • Anjuman‑I‑Ahmadiya Ashait‑I‑Islam, Lahore v. Hafiz Ghulam Ahmad, PLD 1955 Lahore 23 The primary legal issue is whether Section 25 of the Arbitration Act (X of 1940) can be invoked to supersede the arbitration in a case where arbitrators were not appointed by the joint consent of all parties.
  • Muhammad Razzaq Versus Chairman Arbitration Council and others, 2019 CLC 1539 The primary legal issue were, Whether the Arbitration Council had the jurisdiction to fix maintenance allowance after the promulgation of the Family Courts Act, 1964. Whether the decision of the Arbitration Council was valid under Rule 5(6) of the West Pakistan Rules, 1961, requiring decisions to be taken by majority.
  • M. P. A. INC. HOUSTON, U. S. A. AND ANOTHER versus FEDERATION OF PAKISTAN AND 2 OTHERS, PLD 1979 Karachi 453 legal issue was the existence of a valid arbitration agreement between the parties
  • **Haji KHALID USMAN Versus SECRETARY TO THE GOVERNMENT OF THE PUNJAB, AGRICULTURE DEPARTMENT, LAHORE and 3 others, 2008 CLC 1

Conclusion

Arbitration, Mediation, and Conciliation are all valuable tools in resolving disputes without litigation. Each serves a different purpose depending on the nature of the conflict, willingness of parties, and need for enforceability. With increasing legal recognition, ADR is rapidly becoming a preferred path for dispute resolution in Pakistan, offering speed, privacy, and cost-efficiency. Legal professionals and citizens alike should embrace these mechanisms for more accessible justice.