Arbitration vs. Mediation- Explaining the Differences

The main forms of alternative dispute resolution (ADR) are mediation and arbitration. In most cases, it is preferable to choose one of ADR methods rather than litigation since both mediation and arbitration are cost-effective, less formal and don’t last longer as compared with trials.

The two main types of ADR have a lot of similarities and differences. In order to find out which method fits your situation, essential characteristic features of both are given below.

Mediation is an alternative and a confidential legal process of selecting a neutral third party to facilitate the process of decision making. Mediator is not a decision-maker; he brings opposing parties together to settle a dispute. He attempts to work out an agreement which can be either accepted or rejected by the parties. Mediation is a way to avoid court trials; hence it doesn’t follow the rigid rules and processes used in the court. Mediation is a non-binding process, which doesn’t restrict the parties to pursue the dispute in the future even if they have reached an agreement.

Arbitration is also a confidential legal process, where a third party is elected to make a final decision in favor of one of the parties. In arbitration, the decision is made by the arbitration panel. There can be one arbitrator selected by either parties or two arbitrators for each side that elect the third arbitrator. Arbitration hearings usually last between a few days to a week. After the hearings, the arbitration panel deliberates a written decision, which is binding and cannot be appealed. Arbitration process is more formal than mediation and is a simplified version of a trial.

Arbitration vs mediation:

  1. Decision making– an arbitrator makes a final decision while a mediator acts as a middleman who facilitates discussions between the opposing parties;
  2. Appealing process– decisions made by an arbitration panel are binding and cannot be appealed. Appeals can be accepted under the specific circumstances. On the contrary, mediation settlements are non-binding; a mediator facilitates rather than imposes the process of decision making;
  3. Withdraw from the process– as mediation is non-binding, both parties are able to withdraw from the process at any stage of a settlement. In contrast, parties involved in arbitration, can withdraw only before a final decision is made because arbitration decisions are binding;
  4. Flexibility and cost-efficiency– arbitration processes are less flexible and more costly than mediation.
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