Life, at its very essence, revolves around relationships. We cannot claim to be fully alive and well if we’re not interacting and transacting with other people. This simple fact makes disputes inevitable, leading to the development of the judicial system and the popularity of litigation as a means of seeking redress in civil matters or meting out punishments in criminal cases. However, increasing dissatisfaction with the burden of lawsuits gave rise to a new system of settling out of court; hence the increasing popularity of arbitration over litigation especially when the issue to be determined is clearly not criminal.
Arbitration is essentially a type of Alternative Dispute Resolution (ADR) in which two parties agree to have their disputes resolved by an impartial adjudicator. Although it presents disputing parties the opportunity to settle out of court, the arbitral process shares similarities with litigation. Much like the same way a judge hands down judgment after looking into the facts of a case, the arbitrator examines the ramifications of a dispute and arrives at a decision based on legal rights and wrongs.
The arbitrator’s decision – referred to as an award – is usually binding on the parties, regardless of how they feel about it. Just like a court case, arbitration produces a winning party and a losing party. So the arbitral process is a lot like having a trial, except that it takes place outside the court room, shielded from the public, and the procedures are less complicated.Arbitration produces a binding award. Mediation produces a mutually agreeable settlement. Click To Tweet
In light of this, arbitration may not be very suitable for disputing parties who otherwise have a cordial relationship and are more disposed to reaching a mutually agreeable resolution. This is where mediation comes in. Mediation is much less formal than arbitration. In mediation, the disputing parties choose an unbiased third party who listens to both sides and helps them to reach a mutually beneficial agreement. Unlike arbitration where we have an award which is binding on the parties whether they agree to it or not, mediation produces a settlement that must be agreed to by both parties for it to be valid.
This means that the mediator cannot impose a decision on the parties. He/she simply helps them understand what is at stake and encourages them to make compromises/trade-offs so that they can meet mid-way. In essence, mediation is more about negotiation than adjudication. So there is no winner or loser in mediation because parties are not forced to accept a settlement against their will. Mediation generally comes with a higher level of satisfaction than arbitration or litigation because the parties can control the process and determine the outcome.By choosing mediation, parties can avoid the hassles of an inefficient judicial system. Click To Tweet
Arbitration requires parties to present their case and testify under an oath, after which the arbitrator renders an award based on facts and evidences. Mediation on the other hand allows parties to vent their feelings and explore creative ways to solve their problems. This often involves several meetings with the arbitrators which can be held jointly or privately. As a result of its peculiarities which include extensive discovery, evidentiary hearings and other formalities, some of which we have discussed, arbitration is usually more demanding – financially and otherwise – than mediation.
Mediation is a more congenial mechanism for resolving disputes. It prevents or at least reduces hostility and loss of relationships because of the more relaxed atmosphere that allows parties to understand the issues and give each other’s interests a fair consideration. As a result of its high success rates, many courts now present disputing parties with an option to mediate before putting their cases on the trial calendar. Parties can save themselves the hassles of an inefficient and overly taxing judicial system by seeking to resolve their disputes themselves with the help of an impartial third party.