The difference between Mediation and Arbitration

In the seeking of a resolution to a legal dispute it is important for the parties to fully understand the…
By Wihan Vermeulen
17 May 2022

In the seeking of a resolution to a legal dispute it is important for the parties to fully understand the options available to them. In certain cases there is no choice, but a certain process is prescribed by the relevant authorities. The most common processes involve Mediation or Arbitration, and the following explains the difference.

What is Mediation?

In a mediation procedure, a neutral intermediary, the mediator, helps the parties to reach a mutually satisfactory settlement of their dispute. Any settlement is recorded in an enforceable contract (The settlement agreement, drafted by the mediator). A party to a mediation cannot be forced to accept an outcome that it does not like. Unlike an arbitrator or a judge, the mediator is not a decision-maker. The mediator’s role is, rather, to assist the parties in reaching a settlement of the dispute.

In a mediation, the parties cannot be compelled to disclose information that they prefer to keep confidential. If, in order to promote resolution of the dispute, a party chooses to disclose confidential information or make admissions, that information cannot, be provided to anyone – including in subsequent court litigation or arbitration – outside the context of the mediation. The existence and outcome of the mediation is also confidential. Mediation’s confidentiality allows the parties to negotiate more freely and productively, without fear of publicity.

In court litigation or arbitration, the outcome of a case is determined by the facts of the dispute and the applicable law. In mediation, the parties can also be guided by their business interests. As such, the parties are free to choose an outcome that is oriented as much to the future of their business relationship as to their past conduct. When the parties refer to their interests and engage in dialogue, mediation often results in a settlement that creates more value than would have been created if the underlying dispute had not occurred. Because mediation is non-binding and confidential, it involves minimal risk for the parties and generates significant benefits.

What is Arbitration?

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding and enforceable decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. Arbitration can only take place if both parties have agreed to it or if arbitration has been built into a commercial agreement as the default dispute resolution method. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

Under most Arbitration Rules/Laws, the parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. Alternatively, we can then appoint the relevant experts from our panel of arbitrators. In addition to their selection of neutrals of appropriate nationality/expertise/experience, parties can choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage. The arbitrator/arbitration tribunal’s decision is binding and easy to enforce, the parties agree to carry out the decision of the arbitral tribunal without delay.