The terms “arbitration” and “mediation” are types of alternative dispute resolution (ADR) methods. Still, they represent distinct processes with some key differences. Here’s a breakdown of the main differences between arbitration and mediation:
1. Role of the Neutral Party:
- Arbitration: In arbitration, an impartial third party or a panel of arbitrators is appointed to hold a meeting to listen to the arguments and evidence presented by both sides and make a binding decision, known as an arbitration award. It operates like a court room and trial, but it is not held at the courthouse with a judge. However, the arbitrator’s job is to act like a judge and issue a decision based on the evidence presented to the arbitrator.
- Mediation: In mediation, the mediator is a third party chosen by both parties to act as a neutral and to facilitates negotiations between the disputing parties. The role of the mediator is to facilitate a meeting to help the parties reach a mutually acceptable resolution. Unlike an arbitrator, a mediator does force a decision on the parties or award on the parties; instead, they help the parties find a solution through communication and negotiation.
2. Decision-Making Authority:
- Arbitration: The arbitrator’s decision, known as the arbitration award, is generally binding on the parties involved, like a court judgment. In advanced, the parties mutually agreed the arbitrator’s decision will be binding and they will abide by the arbitrator’s decision, and there are limited grounds for appeal.
- Mediation: In mediation, the mediator does not decide or force a resolution on the parties. The parties retain control over the outcome and have the final say in reaching a settlement. The mediator’s role is to facilitate communication, clarify issues, and help the parties explore options for resolution.
3. Legal Formality:
- Arbitration: Arbitration proceedings can be more formal and structured, resembling a legal hearing. The parties present their case, provide evidence, and follow procedural rules outlined in the arbitration agreement or governing laws. The arbitrator’s decision is legally binding and can be enforced in court.
- Mediation: Mediation is generally less formal and structured compared to arbitration. The process is flexible, allowing the parties to shape the discussions and the outcome. Mediation often encourages open dialogue and collaborative problem-solving rather than adhering to strict legal procedures.
4. Control and Outcome:
- Arbitration: The arbitrator’s decision is binding, and the parties have less control over the outcome. The arbitrator evaluates the evidence and arguments presented by both sides and renders a decision based on the facts and applicable law.
- Mediation: The parties in mediation have more control over the outcome. They actively participate in the negotiations and can explore creative solutions that may better meet their interests. The mediator facilitates the process but does not impose a resolution.
Both arbitration and mediation offer advantages in resolving disputes outside of traditional court litigation. Arbitration is more appropriate when parties want a binding decision from a neutral third party. At the same time, mediation is often preferred when the parties desire more control over the outcome and seek a collaborative resolution. The choice between the two depends on the nature of the dispute, the parties’ preferences, and the specific circumstances involved.