What is the difference between mediation and arbitration?
In short, mediation is where a neutral party, the appointed mediator, encourages and facilitates a solution without ever imposing (or forcing) a solution upon the parties involved in the dispute.
When a dispute goes into mediation, the neutral third party will try to encourage both sides to consider more than just their legal rights. They will aim to encourage both parties to take into account their best interests, including their commercial interests with the aim to get parties to agree to terms that are beneficial for both sides.
If these negotiations are successful the parties will enter into a legally binding agreement.
Arbitration is where a decision is made by an appointed third party and is a legally binding decision. All parties involved are bound by this decision which is made by the arbitrator. Often certain contracts such as JCT contracts contain a requirement for the parties to resolve any disputes by using arbitration.
In this case, and similar to court proceedings, arbitration can be frustrating for certain parties as the outcome can be beneficial for one and detrimental for another.
Mediation vs arbitration, which is the best option for me?
Mediation is usually the best option for businesses looking to settle a dispute as the outcome can be mutually beneficial as it is decided between the two parties. If mediation is not successful then the parties still have the option of proceeding to court for a determination.
Essentially, mediation results in a win-win scenario for both parties as they are able to take into account their commercial interests. A mediator has no power to impose a settlement upon either party, but merely facilitates the negotiations.
Mediation takes far less time than arbitration and costs far less.
Arbitration is usually the best option when both parties cannot come to an agreement. It may be required under the terms of the contract. This can happen when negotiations break down or where one or both parties are being particularly difficult. Arbitration is still a cheaper option to litigation, yet can be more time consuming than mediation.
When an issue is taken into arbitration, the outcome is decided by an expert third party, usually an arbitrator. It can be particularly beneficial in technical cases where an expert in that particular field will reach a determination. They will take into account all the evidence and issue a final award based on their findings.
If you are currently involved in a commercial dispute and wish to discuss your options, contact the expert solicitors at Stephensons on 0203 816 9303.