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What is the Difference Between Mediation and Arbitration to Resolve Your Commercial Dispute?

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If your business has a commercial dispute, you will want to resolve it to allow your business to continue smoothly. There are various ways to do this, and most business owners will want to avoid court proceedings. Therefore, companies often use alternative dispute resolution (ADR) methods to solve their disputes. Two popular methods are mediation and arbitration. This article will explain the differences between mediation and arbitration to resolve a commercial dispute.

What is Mediation?

Mediation is an alternative dispute resolution (ADR) process to attempt to resolve a dispute. It is a voluntary and confidential process used worldwide 

If you are considering mediation to resolve a dispute, the first step is to choose a mediator. As the mediation process is flexible, it is up to the mediator and the parties to decide the process for the mediation. However, your mediator will always play the role of facilitating discussions to reach an agreement. This usually occurs as follows:

  1. a meeting between the mediator and both parties to explain the mediation process and for both parties to read opening statements;
  2. each party to the dispute meets privately with the meditator to go through their case;
  3. the mediator encourages the parties to settle the dispute, passing offers and counter offers to the dispute; and 
  4. a settlement may occur where parties will draft a settlement agreement to reflect this. 

The mediation process can sometimes happen over a day unless it is particularly complicated.

What is Arbitration? 

Arbitration is another alternative dispute resolution (ADR) process for attempting to resolve commercial disputes. Therefore, it does not occur in court and is confidential. Unlike mediation, arbitration is a formal process where specific rules and procedures apply.

If you choose arbitration for your dispute, you may have one arbitrator or a panel of arbitrators. While they will be independent of your dispute, they will be experts in an area of your dispute. You and the other party may choose the arbitrator for your dispute or, instead, decide how the arbitrator or arbitrators will be selected. The arbitrator’s role is to consider both sides of the commercial dispute and make a final, binding decision.

The arbitration process can include more than one hearing, lasting from half a day to months.

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Mediation vs. Arbitration

While mediation and arbitration are both alternative dispute resolution (ADR) methods to resolve a commercial dispute, they have key differences. We list some of these below in the table.

MediationArbitration
Mediation involves one commercial mediator.Arbitration involves one arbitrator or a panel of arbitrators.
The parties to the commercial dispute will usually choose the mediator. The parties to the dispute may choose the arbitrator(s) or, instead, the process for selecting them.
A mediator is not always an expert in the field of the dispute.Often, an arbitrator or panel of arbitrators will be experts in the field of dispute.
Mediation is a reasonably flexible ADR process.Arbitration is a formal ADR process.
The parties to the dispute decide on a settlement to the dispute rather than the mediator, although they may not ever actually settle.The arbitrator or panel of arbitrators makes a binding decision on the commercial dispute.
A mediator will listen to both parties but not make judgments on their views.An arbitrator will consider both parties sides in order to make a final decision.
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Key Takeaways

Commercial mediation and arbitration are alternative dispute resolution (ADR) methods a business owner can use for a commercial dispute. These are out-of-court, confidential methods to resolve disputes with an independent third party. There are key differences between mediation and arbitration. For example, a mediator will facilitate the parties in settling the conflict, and an arbitrator will hear both sides and make a binding decision. Mediation is voluntary and may not result in a settlement by the parties to the commercial dispute. Arbitration, however, will usually result in a binding decision by the arbitrator or panel. Also, in mediation, there is one mediator, yet in arbitration, there may be one arbitrator or a panel of arbitrators who will be experts on an area of the dispute. 

If you need help understanding the difference between mediation and arbitration, our experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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Clare Farmer

Clare Farmer

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