There are multiple ways to resolve legal disputes. Mediation and arbitration, two such methods, are often confused to be the same. However, though there are similarities, they are quite different.
ArbitrationMediationTrial is replaced with arbitrationTrial is paused until the mediation endsCan involve a single or a panel of arbitratorsUsually involves a single mediatorThe arbitrator’s main role is to provide a decision on the disputeThe chief role of a mediator is to negotiate between the parties and help them come to an agreementThe arbitrator will hand out a decision and end the arbitrationMediation ends when a settlement is reached or parties are in a deadlockThe arbitrator’s decision is close to a court decision and enforceable on the partiesThe agreement is made of good faith and is not enforceable
Arbitration in Canada has a strong legal basis and is governed by the Commercial Arbitration Act. It may occur due to a dispute resolution clause, when parties agree to it, or when a government authority imposes it on the disputed parties. An arbitrator is agreed upon by the parties.
Arbitration is a way to solve a dispute through a formal and rigorous process, ensuring the best possible outcome. The arbitrator can be a retired judge, senior lawyer or professional, as required by the arbitration. It is a more cost effective option than court proceedings. The arbitrator uses evidence and questioning of individuals to come to a decision.
The arbitral awards, or decisions made by the arbitrator tribunal, are legal and binding. This prevents any party from ignoring the resolution.
A big disadvantage of arbitration is that because of its formal process it is time consuming, especially if there is a lack of cooperation between the parties.
Mediation offers a more flexible option as compared to arbitration. Mediation is simply a negotiation between the disputed parties. According to the Canadian Bar Association, it is “the intervention into a dispute or negotiation by an acceptable, impartial and neutral third party who has no decision making power, to assist disputing parties in voluntarily reaching their own mutually acceptable settlement of issues in dispute.”
Mediation offers an informal environment for the parties to come to an agreement on the dispute. The role of the mediator is not to make a decision, but facilitate communications and sharing of information so that the parties can reach a decision. Because of its informal environment, the agreement can’t be legally binding on the parties.
Mediation is perfect if the issue is not a complex one, parties maintain good relations with each other and the good faith agreement will stand. Arbitration is perfect for complex disputes where the relations between the parties have broken down.
Each situation is different. To know whether you are picking the right option to solve the dispute, take legal assistance.