Mediation & Arbitration explained
What are mediation and arbitration?
Arbitration is a cost-effective way to have a binding decision made in private rather than going through the courts. An Arbitration Award (that is the name given to the decision) can be made within three months of the beginning of the case, so the parties get a binding decision more quickly than going to the court. The arbitration service is also designed to promote its use, so it is quicker, cheaper and easier to use than litigation.
Arbitration is binding in more than 140 countries signed up to the New York Convention 1958, which means that an Award made in the UK is automatically enforceable in any of those 140+ countries - the parties do not have to start a new legal case in each country - this is a huge advantage following the UK's decision to leave the EU.
The arbitrator will be selected based on criteria of the parties and will often be more knowledgeable in the area of dispute than a judge would be. The arbitration will normally be done by documents only meaning that the parties don't even have to retain a solicitor, they can do it themselves in their own time.
At a time when there is great public concern over the Coronavirus (COVID-19) both documents only arbitration and mediation, which can be done online or by telephone, allow for the resolution of disputes without the risk of infection in a court or other setting.
A significant difference between mediation and arbitration is that an arbitrator is like a private judge - he or she makes a decision and it is binding. He or she does not try and find a fair resolution or settlement - one party will lose and one will win.
In mediation the mediator tries to help the parties to negotiate an outcome but ultimately it is up to the parties, they can walk away at any time (you can't walk away from an arbitration, the arbitrator can still issue an Award even if a party doesn’t take part once arbitration has begun).
Mediation tends to be slightly cheaper than arbitration because it is often done in a day and the mediator does not have to make a written decision. Arbitration takes a little longer and the Award has to be compliant with the Arbitration Act 1996, so the arbitrator tends to be paid slightly more. That’s not always the case but it is a good rule of thumb and, in our view, fair.
In simple terms, mediation is a process where an independent third party, known as the mediator, facilitates negotiations between disputing parties leading to them being able to resolve their dispute on their own terms.
A big advantage of mediation is that it often helps repair fractured relationships and the parties can even end the dispute on good terms - it is not unusual for a new deal to be struck at mediation and for the parties to end up in the pub having a beer. Arbitration, like I said earlier, is win / lose and does not protect existing / future relationships in the same way. However, it is much better than litigation which is akin to war and washing your dirty linen in public. Both arbitration and mediation are done in private - nobody even knows that a dispute has taken place and anything said in either process can't be used if the matter goes to court.
A mediated settlement is binding as a contract, and if it is breached one party can sue the other for breach of contract. Arbitration is much tighter, the failure to take action under an Arbitration Award can be dealt with swiftly by the court who will not treat it like a breach of contract, but as a breach of an order of the court.
Arbitration Awards can only be appealed on a point of law, not on a point of fact and as such appeals are very rare (and expensive) and successful appeals even rarer still.
Finally, if there is a mediation or an arbitration clause in a contract and a party tries to go direct to the courts the courts will generally tell them to go away and mediate or arbitrate. Mediation under those circumstances is still voluntary but the court will make it clear that they will frown on a party refusing to mediate without very good cause - their frown will most likely come in the way of penalties relating to costs. If a party wins at court but had earlier refused to mediate and the court feels there was no valid reason to turn mediation down, the court will more likely than not award costs against the winning party set from the date that they refused to mediate. The same applies if it was the losing party refusing to mediate.
Arbitration is different, the court will just stay court proceedings and tell the parties to arbitrate if there is a clause. It is very unlikely these days that a case would even get as far as court if it had a good clause in it because a lawyer would tell their client to try mediation first - or tell them they have no real choice other than to arbitrate, depending on what the clause says.
What about conciliation?
Conciliation is very similar to mediation. The only real difference is that the conciliator is allowed to make a recommendation to the parties in the hope that the dispute can be resolved.
What about adjudication?
Used mainly in the construction industry, adjudication is a shorter process akin to arbitration where the adjudicator makes a decision which is binding on the parties until the contract is complete. To find out more about Hunt ADR Adjudication Services please visit here.
Can you train me to be a mediator or arbitrator?
We are a Civil Mediation Council (CMC) Registered Training Provider and a CMC Registered Mediation Provider. We do not currently provide arbitrator training. To find out more about our training & CPD please email us.