What’s The Difference Between Mediation And Arbitration?
Both mediation and arbitration are non court processes, however the two methods of alternative dispute resolution are quite different.
Mediation is often the first attempt to resolve a dispute before it goes through a more formal method such as arbitration or court.
Mediation is generally the least costly and time consuming, and involves both parties trying to negotiate a solution to their problem with the assistance of a mediator. A mediator is a third party who is neutral, and guides discussions. The mediator is not able to make binding decisions on the outcome.
The point of mediation is to arrive at a solution that both parties can agree to. The mediator cannot enforce the outcome.
Mediation can also be used throughout more formal processes, not just on its own. For example, mediation might be used in conjunction with court processes and arbitration, at the beginning, prior, or during other formal decision making processes.
The benefits of mediation are,
- Cheaper than litigation
- Can maintain a relationship with the other party
- Faster process
- Parties can better understand the other party’s side
- Confidentiality is maintained
Arbitration on the other hand, is a formal process that is still not a court process, but has an outcome that is binding on both parties. Arbitration is commonly used for commercial disputes, and can also be used internationally. The process of arbitration is much more formal than mediation, where a tribunal of arbitrator/s is made and both sides present evidence to the tribunal.
Benefits of arbitration are,
- Also cheaper and faster than litigation
- Can maintain confidentiality
- Enforceable decision is made (if a party does not follow through with the decision, it can be enforced by court)
- Easier to enforce internationally than a court decision which may not be recognised outside of an Australian jurisdiction
As arbitration and mediation has so many benefits to resolve contractual disputes, it is especially important this is drafted into your business contracts correctly. Many businesses for example will state in their business contracts that mediation must be attempted before going through court for example. Here at Sprintlaw, we are experts in drafting contracts and can discuss these inclusions and what they mean with you.
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