There are various Alternative Dispute Resolution (ADR) methods. They include arbitration and mediation. Find out their differences below.
Arbitration is a formal process similar to court proceedings.
Usually, parties agree to arbitrate prior to a dispute arising in that the terms of their agreement provide for arbitration – i.e. the agreement provides that in case a dispute arises the parties will refer the dispute to arbitration.
Arbitration is binding given that when it is concluded, the independent third party called the arbitrator will issue an arbitral award binding on the parties. Once the arbitral award is issued, it is enforceable through the court and the power of the court to annul such an award is rarely exercised.
In addition, the parties must present their case to the arbitrator and any assertions made by them must be supported by evidence. Essentially, an arbitrator’s decision is based on legal rules.
Mediation is more informal than the procedure taking place in the court or in arbitration. It is a form of assisted settlement of a dispute and it is not governed by binding procedures, nor does it involve the issuing of a judgement by the Mediator.
ADR methods do not only offer a flexible, fast and cost-effective process, but are also utilized in cases where disputes would not have otherwise been brought before the Court. An example is a dispute between family members regarding their family business where they do not want to create friction or perpetuate the dispute.
Mediation is a form of assisted negotiation. The Mediator, as an independent third party, intervenes in the negotiation process to help the parties resolve their dispute. Nevertheless, the parties retain control over the drafting of the settlement agreement as well as the conditions relevant to resolving the dispute.
Differences between mediation and arbitration
Unlike Arbitration, the Mediator is not responsible for deciding on the matter at hand and therefore does not follow legal or procedural rules. In addition, the mediation framework is not only based on arguments and evidence presented to the Μediator, but it is also based on the following factors:
a) identifying of the root of the problem,
b) clarifying the problem and
c) restoring the relations between the parties. It should be noted that the mediator’s impartiality and neutrality create a friendly environment between the parties.
Therefore, due to the consensual nature of mediation, the procedure as well as the course of the dispute is left to be handled by the parties and not by a Judge or Arbitrator. If successful, then the remedies will generally be real and readily available, because the parties usually agree on issues that they are able to achieve. In this sense, there is no winner or loser in that both parties are winners.
Also, even though the outcome of mediation may be binding (provided that the parties sign a binding settlement agreement), enforcement is usually not required.
This article does not constitute legal advice.
The publication of this article is partly funded by the European Union’s “Consumer Programme (2014-2020)”.