ARBITRATION - Industrial Relations Management

A process in which a neutral third party listens to the disputing parties, gathers information about the dispute, and then takes a decision which is binding on both the parties. The conciliator simply assists the parties to come to a settlement, whereas the arbitrator listens to both the parties and then gives his judgment.

Advantages of Arbitration:

  • It is established by the parties themselves and therefore both parties have good faith in the arbitration process.
  • The process in informal and flexible in nature.
  • It is based on mutual consent of the parties and therefore helps in building healthy Industrial Relations.


  • Delay often occurs in settlement of disputes.
  • Arbitration is an expensive procedure and the expenses are to be shared by the labour and the management.
  • Judgments can become arbitrary when the arbitrator is incompetent or biased.

Methods of arbitration:

There are two types of arbitration:

  • Voluntary Arbitration: In voluntary arbitration the arbitrator is appointed by both the parties through mutual consent and the arbitrator acts only when the dispute is referred to him.
  • Compulsory Arbitration: Implies that the parties are required to refer the dispute to the arbitrator whether they like him or not. Usually, when the parties fail to arrive at a settlement voluntarily, or when there is some other strong reason, the appropriate government can force the parties to refer the dispute to an arbitrator.

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Industrial Relations Management Topics