Disputes are everywhere these days. These disputes may be big or small, but both types take time to resolve. Arbitration and mediation are the two ADR methods that are used to settle the dispute. By these methods, disputes can be settled without going to court. These two methods are broadly used to avoid litigation and unnecessary mind load. In this article, we will discuss the difference between arbitration and mediation in detail. Settlement by these methods is very quick and satisfactory. There are many other methods to settle disputes which are conciliation, adjunction, and collective bargaining, etc.
At this time disputes are very common in every field like business, jobs. In business mostly disputes are the same as each other. Businesses who provide services to the other their thinking is that they are paid less than their services on the other hand the consumer thinking they are not getting the same things as per contract. These types of disputes are very common in the business. The litigation process is the only process which is used for a long time. But these days’ time is money to save time people go for the other methods of settlement. That’s why these two methods mediation and arbitration come in front of the people.
These of these methods come under the alternate dispute resolution (ADR) methods. These ADR methods are becoming very popular among the people due to the settlement taking very little time. Litigation is a lengthy process to solve disputes. These two mediation and arbitration are the best alternative to litigation.
Table of Contents
Arbitration VS mediation
| Parameters | Arbitration | Mediation |
| Definition |
It is a dispute settlement method in which a third party passes an award or order on the basis of evidence, proof. |
Mediations are also a method of dispute settlement in which a third party assists or directs both parties to take a suitable decision about the dispute which is agreeable for both of them. |
| Third-party | Arbitrator which is one or more than one. | Mediator, always one |
| Process | It is a formal process. | Mediation is an informal process |
| Role of the third party | Arbitrator roles like Judge. | Mediator role like a facilitator. |
| Nature | Arbitration nature is Adversarial. | Mediation nature is very cooperative. |
| Private meeting | Not possible | possible |
| The final result depends upon | Evidence and proofs. | Needs, rights, and interests. |
| Control on the final result | Arbitrator | Parties. |
| Final decision |
The arbitrator takes the decision and binds both parties. |
The mediator doesn’t take any decision he only assists the parties to make a decision that is agreeable for both the parties. |
Arbitration
Arbitration is a way to settle a dispute outside the courtroom. In this method, a third party or third person passes a final decision. This decision or order is also known as an award. In the process of dispute settlement by arbitration is a third party check all the dispute details, hear all the thoughts and the arguments of both parties. After taking all the details, evidence, and information about the dispute arbitrator make a decision as an order. This meeting is a formal meeting.
The arbitration process is almost the same as the courtroom. This is a private trial in which two parties’ disputes are settled without a courtroom. The decision or award binds both the parties and this decision is legally enforceable.
Currently, all business agreements contain an arbitration clause. This clause states that if any dispute arises between the parties. That dispute will be solved or handled by the arbitrator of the particular location. Mandatory arbitration is becoming very famous in all the business contrast. As mandatory all the business disputes will be judged by the areal arbitrator not by the courtroom. In this way, arbitration becomes the best alternative to litigation. Lease and rental agreement disputes are also settled bt arbitration there is also an arbitration clause in these agreements.
There is an act, 1996 in India for arbitration and conciliation. This act is modified in 2015, this act follows UNCITRAL arbitration rules 1976. This act provides a chance for the parties involved in the dispute to be here and settle on the procedure that would be followed. As per this act, all the proceedings of the disputes will be completed within 12 months. In case if both parties are agreed to a time extension six months is added for the arbitration consent.
Types of the Arbitration
- Contractual Arbitration
- Statutory Arbitration
- Ad-hoc Arbitration
- Foreign Arbitration
- Domestic Arbitration
- International Arbitration
- Institutional Arbitration
- Fast track Arbitration
Advantages of arbitration
- Arbitration is very cost-effective than the litigation process. Litigation is a lengthy and very expensive process of dispute settlement.
- An arbitration award or decision is passed very quickly. As per the arbitration act, the decision should be finalized within 12 months.
- Arbitration is a fair process in which the arbitrator is selected by both parties. There is no right for a single party to select the arbitrator.
- Another advantage of arbitration is decision will be defiantly out before 12 months.
- This process is very confidential. Which provides that no secretes of their business will not come in the public.
- The arbitration process is very simple because no courts are involved in it.
- Disputed parties are free to choose a specialized arbitrator who will handle their dispute in an effective way.
Mediation
It is a method to settle the dispute in a mutual and effective way. By this method, parties involved in the dispute have no need to go to the courtroom for the judgment of their dispute. In this method, a third party listens to the matter of the dispute and helps to reach a solution of the dispute which is acceptable by both parties. The third party is known as a mediator. Mediators understand the interest and rights of both parties very carefully.
Mediation is a confidential process; in this both the parties take part. details and the secrets of their business are not discussed or revealed with any other person outside the meeting or hearing. In mediation, a mediator is an independent person. The mediator does not pass any order or decision which binds the parties. The motive of mediation is to find a mutual solution to the dispute which is agreeable and profitable for both parties. The mediation process does not make any agreement or order to the parties like arbitration. A mediator plays a facilitator role who makes an infarction bond between the parties and tries to compromise between them.
Types of mediation
Facilitative mediation
In facilitative mediation, the main focus of the meditator is to bring both the parties to a solution on which both the parties agree. In this compromise is the basic point to reach which is also very good for the parties.
Directive mediation
In Directive mediation, the involvement of the mediator is increased to find a suitable solution to the matter. For a better solution, he has to direct some options to the parties. A suitable option has to be chosen which is agreeable by both parties. He offers options to the parties and remains more protective.
Transformative mediation
In this mediation, the mediator starts a conversation between the parties and listens to their matters, and follows their leads of the dispute. After listening to the whole matter and discussion he has to make a solution that is based on their discussion. This solution will be agreeable to both parties.
This mediation method is a step before the litigation. Compromise is the best solution to any dispute. It is more profitable to resolve the dispute outside the courtroom with mutual understanding.
Advantages of Mediation
- The main focus of the mediation is to find a solution that is suitable and agreeable for both parties which leads to a more profitable outcome.
- The cost of the mediation is very low because it’s just a conversation between the parties. There is no need to engage a legal counsel for a long period.
- Mediation increases the understanding between the parties involved in the dispute. All the solutions of the dispute are come out after mutual understanding and interests which leads to a more friendly environment. Which heals their relations.
- This process is very confidential, which protects both parties from the unusual insults in their business markets.
- Mediation allows the parties to modify the solution or idea as per their suitability. Parties are free to choose a suitable meeting time as per their schedule, which makes this process very flexible in nature.
The main difference between Arbitration and mediation
Both methods are used to settle the dispute. But there are some differences between them.
- Arbitration process same as the litigation process which is conducted outside the courtroom. Mediation is a simple conversation between the parties to find a mutual decision of the dispute.
- Arbitration passes an award as an order-like courtroom that binds the parties. While mediation method encourages the parties to find a suitable and profitable solution to the dispute.
- The final result in the arbitration is controlled by the arbitrator. On the other hand, the final decision is controlled by the parties who are involved in the dispute.
- The nature of the arbitration is very adversarial, while mediation is very
- In mediation, there is only one meditator. But in the arbitration, there may be more arbitrators who sit in the teams like 1, 3,5, or in odd numbers panels only.
- The mediation process is more informal than the arbitration process.
- There is a 100 % possibility that arbitration finds a solution to the dispute. But in mediations, the possibility of outcome is not 100 %.
- In mediation, the solution of the dispute is found as per the interest and the rights of both parties. But on the flip side final decision is taken as per evidence of the dispute.
- There is a possibility of private meetings of the parties with the mediator in mediation. While private meetings are not possible in the arbitration process.
- The arbitration process is ended when the award or order is handed. And mediation process is ended when a mutual solution of the dispute is finalized which is agreeable to both parties.
Conclusion
From the above discussion, it is very clear that both methods have their own advantages. If some have business disputes, they have to see their needs and the requirements after choosing a suitable method to solve the dispute. In business, the basic need is mutual relations between the parties. To save mutual relations they have to choose the mediation. After the head-to-head discussion, there is a possibility to clear many confusions. Which will help to heal their relations. If there is no outcome is possible by the mediation in that case arbitration is the best choice to resolve the dispute. Mediation is a cost-effective method to solve disputes than arbitration.
this is all about the difference between arbitration and litigation. we hope you understand the concept of arbitration and litigation very well. if you have any suggestions please feel free to comment on us.
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