Defining Mediation and Arbitration
What is Mediation?
Mediation is a collaborative negotiation process that a neutral third party called a mediator facilitates. The mediator helps guide the parties toward a mutually agreed-upon dispute resolution but does not impose a decision. Key features of mediation include:
- Parties choose to participate and can withdraw at any time.
- Discussions can happen in private, when necessary, allowing the mediator to work with each side.
- The process has no set format and can be adjusted to fit the needs of the parties.
- The focus is on what the parties want and on helping them reach a dispute resolution that both can live with.
- The parties decide what happens. They have control over the outcome.
What is Arbitration?
Arbitration is a more formal process wherein a neutral arbitrator hears evidence and arguments from both sides and renders a legally binding decision. Important aspects of arbitration include:
- Mandatory participation once agreed to;
- Formal presentation of evidence and arguments;
- Arbitrator acts as judge and makes final ruling;
- Decision is legally enforceable; and
- Less flexible than mediation.
Key Distinctions: Mediation vs Arbitration
Although mediation and arbitration are both aspects of alternative dispute resolution (ADR), they are quite different from one another in some key areas. Here are those areas and how these two forms of ADR differ in each:
| Aspect | Mediation | Arbitration |
| Decision-maker | Parties themselves | Arbitrator |
| Outcome | Non-binding agreement | Legally binding award |
| Formality | Informal, flexible | More formal, structured |
| Focus | Interests, relationships | Rights, entitlements |
| Control | Parties control outcome | Arbitrator controls outcome |
When Mediation Takes the Lead
Mediation is frequently favored in circumstances when:
- Relationships require the preservation of relationships;
- The need exists for inventive, flexible solutions;
- Parties desire dispute resolution with direct control;
- Open communication can lead to good understanding;
- The process needs to be both swift and inexpensive.
Real-World Mediation Example
A family-owned business faced sibling conflict over the company’s future direction. Thanks to mediation, the family was able to:
- Express concerns openly in a neutral setting;
- Understand each other’s perspectives and interests;
- Brainstorm some creative options for moving forward;
- Reach a compromise that preserved family relationships and allowed the business to move forward.
Mediation made it possible for this family to dispute resolution without causing a rift that would jeopardize both family and business.
The Power of Arbitration
When arbitration is the preferred choice, generally it is for one or more of the following reasons:
- A legally binding decision is required.
- Expert judgment on complex matters is needed.
- Privacy and confidentiality are paramount.
- An alternative to litigation that is more efficient is desired.
- Specific industry knowledge is a benefit.
Arbitration in Action
Companies in different countries resolved an international business contract dispute resolution through arbitration. Benefits included:
- Choosing an arbitrator with pertinent industry knowledge
- Keeping arbitration confidential so as to not reveal sensitive business information
- Making the arbitral award binding and thus enforceable across borders
- Ensuring that the dispute resolution occurred faster than if the parties had engaged in a traditional court fight
Comparing Costs: Finding Efficiency
Source material:
While costs can vary widely based on case complexity, generally:
- Mediation tends to be less expensive due to its efficiency and informality.
- Arbitration costs fall between mediation and full litigation.
Factors influencing costs:
- Duration of the process
- Complexity of the dispute resolution
- Fees for mediators/arbitrators
- Attorney involvement
- Administrative expenses
“While arbitration may have higher upfront costs than mediation, it can still offer significant savings compared to taking a case through the court system.” – ADR Cost Analysis Report
Timelines: The Path of Expediency
Both mediation and arbitration usually result in quicker dispute resolutions than traditional litigation. Specifically, for each method:
- Mediation: can often be completed in a matter of days or weeks.
- Arbitration: usually takes several months, but is quicker than court proceedings.
- Litigation: can drag on for years.
Among the factors that impact how long a dispute resolution takes are:
- The availability of the parties and neutrals
- The complexity of the issues
- The amount of evidence and number of witnesses
- The willingness to compromise (in mediation)
The Roles They Play
The Mediator’s Role
A neutral facilitator is a mediating party that helps other people come to an understanding. A mediator helps the people he or she is working with in the following ways:
- He or she helps them improve communication.
- He or she helps them identify what their underlying interests are.
- He or she helps them generate options for dispute resolution.
- He or she helps them reality-test potential solutions.
Mediators don’t make decisions or impose outcomes.
The Arbitrator’s Role
An arbitrator functions more like a judge:
- Manages the process and sets procedures
- Hears evidence and arguments from both sides
- Applies relevant laws or contract terms
- Renders a final, binding decision
Arbitrators have decision-making authority that requires a mediator to act more like a judge.
Legal Weight: Binding vs Voluntary
Arbitration Awards
They have the same legal weight as court judgments: Binding, enforceable, limited grounds for appeal. They can be enforced anywhere in the world: International conventions give arbitration awards global reach.
Mediation Agreements
Non-binding and non-mandatory unless made so by the parties formalizing a contract. Can be made to have legal effect if the parties choose to have it enforceable. Rely more on good faith compliance by the parties.
Read Also: How to Avoid Legal Risks in International Contracts Expertly
Tailoring the Approach for Your Dispute
Selecting between mediation and arbitration is affected by many factors. These include the following:
- Nature of the dispute
- Relationship between parties
- Desire for control over outcome
- Need for expert decision-making
- Importance of confidentiality
- Time and cost considerations
- Enforceability requirements
An experienced ADR professional can assist in determining the best path for your specific problem.
The Path to Resolution Awaits: Choosing Wisely
Mediation and arbitration are both valuable alternatives to classic court proceedings. They have special features and benefits that might make one or the other—or even both—a good choice for resolving a particular problem. Mediation is a fine alternative if you want to stay on good terms with the other party and if you want to find an effective solution that is not merely the binding sort one might expect from a judge. If you want your dispute resolved by someone with authority (and you want that dispute resolution to be private), arbitration is a fine choice. Sometimes, though, one can use both processes to good effect.
Frequently Asked Questions (FAQ)
Q: May I select mediation or arbitration as the means of resolving any type of dispute?
A: Although many kinds of disputes can be resolved through mediation or arbitration, some legal matters may be more appropriately resolved through one of these processes rather than the other. An attorney can help you assess your situation and decide on the best approach.
Q: Is mediation or arbitration swifter than going to court?
A: Both mediation and arbitration are generally speedier alternatives to traditional court proceedings, with mediation being the more commonly used fast track.
Q: Are agreements reached in mediation legally binding?
A: Elbow grease frequently enters into the equation when parties negotiate a mediated agreement. Mediation agreements are not binding in the same way that court orders are, but they can be made into binding contracts with a little bit of formal lawyering.
Q: May I challenge an arbitration decision as I could a court ruling?
A: You may not challenge an arbitration decision on the same grounds that you could a court ruling. Indeed, very few people are even aware of the grounds on which one could legally challenge an arbitration decision.
Q: Must I have a lawyer to go through mediation or arbitration?
A: You may not need a lawyer to go through mediation or arbitration, but you might want to have one along for the ride. A lawyer knows the route well, and having one aboard frequently makes the trip a lot easier and helps you to reach a dispute resolution.