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What is the difference between mediation and arbitration?

Posted on
July 8, 2020
In categories:

Today, as a result of increasing delays and the cost of litigation proceedings, many businesses and individuals are choosing to resolve their disputes outside of the courts through more cost-effective and efficient means. Alternative dispute resolution has proven to be popular in the commercial world, with two of the most common forms being mediation and arbitration. In this article, we will outline the key differences between mediation and arbitration.

What is mediation?

Mediation is an alternative dispute resolution process where the parties participate in a facilitated negotiation. The mediator, an independent third party, will explain how the mediation will take place and will assist the parties to identify and narrow down the key issues in dispute. This may involve asking questions and encouraging the parties to consider options and alternatives to resolve the matter.As an independent third party, a mediator can provide creative solutions that the parties involved may not have considered prior to the mediation. A mediator however will not:

  • offer legal advice;
  • side with one particular party; or
  • impose any settlement between the parties.

During a typical mediation, the parties will be separated into different rooms. The mediator speaks with one party at a time by shuttling back and forth throughout the course of the mediation.Mediation can be voluntary, court ordered, or required as part of a dispute resolution clause in a contract.

What are the advantages and disadvantages of mediation?

Some of the key advantages of mediation include:

  • It is less formal;
  • It is cheaper than arbitration or litigation;
  • It is confidential; and
  • The parties can offer innovative solutions that go beyond usual monetary offers due to the collaborative nature of mediation. This allows both parties to make offers that protect their commercial interests and preserve their business relationship.

Some disadvantages of mediation:

  • There is no guarantee that the dispute will settle, especially in circumstances where the parties are too far apart in their expectations.

What is arbitration?

Arbitration is a process of dispute resolution where an independent adjudicator makes a binding decision on the disputed issues based on evidence presented by the parties.Arbitration has a more structured process compared to mediation and in this way, it is similar to litigation. However, arbitration differs from litigation as it offers a more flexible and efficient process and can often be finalised in a much shorter time period.Arbitrators have a legal background and will usually have expertise in the area that is the subject of the dispute. An arbitrator�۪s decision can normally be registered in court, and then enforced like a court judgment.

What are the advantages and disadvantages of arbitration?

Some of the key advantages of arbitration include:

  • A final, binding decision that is made
  • It is quicker than litigation
  • It remains confidential between the parties unlike litigation
  • The process is flexible and can sometimes be determined by the parties.

A key disadvantage of arbitration is:

  • Arbitration often ends up costing roughly the same as litigation by the time the parties pay legal fees, the arbitrator�۪s fees and other expenses such as transcript fees and room hire costs.

How can DisputeOver help?

At DisputeOver, we offer flexible mediation services either in person or online via Zoom or Skype. If you are involved in a dispute and wish to consider engaging in mediation, our nationally accredited Mediator would be happy to assist. Contact Simon Matters on (03) 8561 3399 or by email at disputeover@disputeover.com.au.The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.Liability limited by a scheme approved under Professional Standards Legislation.

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