While mediation and arbitration are both attractive alternatives to traditional litigation, it is important to know the key differences of each method before deciding which option is best for your dispute resolution needs.
What are the differences between mediation and arbitration?
As discussed in more detail in our previous article “What Is Mediation?“, mediation is a non-binding form of dispute resolution in which two or more parties to a dispute meet with a mediator (often referred to as a neutral third party) who assists the parties in negotiating with each other to reach mutually acceptable solutions to their dispute. In order for any settlement to be reached by way of mediation, the parties must voluntarily agree to the settlement terms as mediators do not have the power to issue decisions or awards. If the parties are unable to resolve their dispute through mediation, they are still free to seek recourse through alternative means – often in the form of arbitration or litigation through the courts.
While also a form of alternative dispute resolution, arbitration differs considerably from mediation in several key areas. For starters, arbitration proceedings are more formal and structured than mediation and more closely resemble those of traditional litigation. While arbitration’s more rigid procedures can provide much needed structure to parties who are unable (or unwilling) to negotiate the resolution of their disputes, the parties must first specifically agree to submit their disputes to arbitration (usually in an arbitration agreement that forms part of a contract between the parties).
Arbitrators vs Mediators roles
In contrast to the role mediators play in disputes between parties, arbitrators preside over the proceedings in much the same way judges do for litigation proceedings. And while arbitration proceedings are generally structured to limit the scope and duration of some of the more litigation-like procedures (such as discovery) in order to accelerate the process and keep costs down, arbitrators have great latitude to extend and modify these procedures. These broad and sweeping powers available to arbitrators to control and direct the proceedings stand in stark contrast to the relative lack of any meaningful authority afforded to mediators.
In addition to the differing procedural structures and powers imbued to arbitrators to control and direct the proceedings, by far the most distinctive difference between mediations and arbitrations concerns the arbitrator’s role in making formal decisions about how the parties’ disputes should be resolved. Unlike in mediations, where disagreements between the parties merely result in an impasse, the parties of arbitrations never have to agree to the outcome as it is decided for them by the arbitrator. This is because arbitrators, unlike mediators, have the power to decide issues of fact and law relevant to the parties’ dispute and then issue binding (and generally final) decisions (referred to as awards) that are not dissimilar to those issued by a judge or court.
It’s also important to note that very limited grounds exist for parties to an arbitration to appeal and/or set aside an award issued by an arbitrator. Even in circumstances where the ability to appeal is available, they are rarely successful. While the generally final and binding nature of arbitral awards can bring finality and closure to the parties (especially those on the “winning” side), this same finality comes with the potentially huge risk that the “losing” party will not achieve any of the results or relief it seeks.
From this perspective, mediation can offer the possibility for both parties to achieve some of their desired goals – even if that means neither party gets everything they want. In situations where the prospect of receiving an unfavourable verdict, decision, award, etc. is too uncomfortable to risk, attempting to reach a mutually agreeable resolution by way of mediation can be an excellent alternative to both arbitration and litigation.
Our team at Hugill & Ip has extensive experience in dealing with Mediations and other Dispute Resolution issues – so kindly get in touch with us to find out how we can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.