Mediation and arbitration are both forms of Alternative Dispute Resolution (ADR), meaning alternatives to the expensive and time-consuming litigation of a lengthy court battle. Mediation and arbitration are similar in that they bring together parties in conflict to resolve an issue outside of the courtroom. They both are modern mechanisms that tend to solve disputes much more effectively and efficiently as compared to the traditional methods of court induced litigation. But they differ in their respective methods of resolving these disputes.
- ARBITRATION is typically a binding process that replaces the full trial process with multiple chosen people to serve as judges in the case. The parties mutually decide upon the third party for adjudication who in their belief would impartially take a decision regarding their dispute. This person who hears the arguments of both sides and passes a judgement, known as an Arbitral Award, is known as an Arbitrator. Arbitration is generally used for commercial disputes especially in the context of international commercial transactions.
MEDIATION is a non-binding process generally conducted with a single mediator who does not judge the case but facilitates discussion and eventual resolution of the dispute. The parties, with or without counsel, engage a neutral third party, a Mediator, to facilitate productive conversation between them and help each side clarify its interests and concerns. The parties retain control over the entire process, including the format of the process, who can attend the mediation, and how to resolve the dispute.
Facts and Evidence
- In an arbitration, the arbitrator looks into the legal rights and wrongs of a dispute and makes a decision. Once the arbitrator has arrived at a decision, it is binding on parties whether they agree with it or not. It is very much like the way a court case is decided by a judge, except that the process does not take place in a courtroom, and it is not open to the public. As in a court case, there is usually a winning and a losing party in an arbitration process.
In a mediation, the mediator, essentially, helps parties to settle their disputes by a process of discussion and narrowing differences. The mediator helps the parties to arrive at an agreed solution. He does not decide the dispute. In mediation, there is no such thing as a winning or losing party, because there is no binding decision without both parties agreeing to one.
- A successful mediation results in an agreement signed by the parties, none of the parties go out of the mediation process in dismay of the result. After deliberations, they reach a middle ground in the presence of the Mediator. Therefore it is known as ‘Mediation Settlement’
Whereas a contested arbitration results in a decision by the arbitrator himself without the agreement of the parties, both parties might or might not be satisfied with the observation and judgments of the arbitrator like in any regular litigation process but will be legally bound by it. Hence, the ultimate decision of the arbitrator’s panel is known as an ‘Arbitral Award’.
- Mediation can be used for any kind of dispute; there is no need to wait until a dispute results in a lawsuit and is sent to mediation by a judge. Pre-lawsuit mediation is becoming more widely accepted as a sensible way of resolving disputes before they turn into litigation. Besides being confidential and non-binding, mediation is relatively quick and inexpensive compared to litigating a dispute. Mediation is less expensive and considerably faster than a court proceeding and can occur at any time during the pendency of the dispute. Mediation is a confidential proceeding conducted in a less intimidating environment than a courtroom. Solutions can be creative and more suited to the needs of the parties than what the court might be empowered to order.
- Most Arbitrators will be flexible and work around the schedules and needs of the parties. And although arbitration is usually less formal than a courtroom trial, there will be a set of procedures that will apply to both sides as they prepare for the hearing. In arbitral proceedings, the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied.
Because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court verdicts.
In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability.
Scope of Appeal
- Mediators do not make decisions or rulings. Rather, they help the parties create their own voluntary agreement in a confidential setting. The agreement, when signed by each party, is a binding contract. If a settlement cannot be reached in mediation, the parties reserve all of their options to pursue another form of ADR or take their issue to court.
In most cases, the award of the Arbitrator is final and binding on both sides. The opportunity to appeal after a binding arbitration is very limited. However, an arbitral award can only be set aside if the said award suffers from an invalid arbitration agreement, the party’s incapacity to enter into an agreement, the independence and impartiality of an arbitrator, unfair procedure, etc.