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Alternative Dispute Resolution: Mediation vs. Arbitration

Alternative Dispute Resolution (ADR) is a process where a third party, who is not interested in the disputing parties but is neutral and certified to act as a mediator or arbitrator, helps parties to a

Alternative Dispute Resolution (ADR) is a process where a third party, who is not interested in the disputing parties but is neutral and certified to act as a mediator or arbitrator, helps parties to a dispute resolve their issues and reach an agreement in a dispute.[1] ADR serves as an alternative to litigation, operating outside the court system to provide a more private, less adversarial approach while ensuring fair outcomes. Forms of ADR include arbitration, mediation, conciliation, negotiation, and neutral evaluation.

The Black’s Law Dictionary defines mediation to be, a form of ADR which involves a neutral third party who is to help parties to a dispute meet a mutual solution, where both parties go their separate ways happy.[2]. It is a collaborative process, which is made possible by a mediator. The mediator helps parties settle a dispute by identifying the source of the problem and helping parties reach a common end.

In defining who a mediator is, one can say that a mediator is therefore a person who has no prior interest in to the issue presented before him by parties to a dispute. This rule follows the Latin maxim of Nemo judex in causa sua, which says that no man shall be a judge in his case. So therefore, a mediator is an individual who is independent of the parties to a dispute to help them meet a common goal, which is settlement, The aim of this is that unlike litigation there is no winning or losing side, but a mutual agreement between parties to a befitting end.

The functions of a mediator are:

  1. To guide discussion between disputing parties for them to identify issues and interests.
  2. To assist parties see their flaws and error and help them reach an agreement.

Features of Mediation

  1. Voluntary Participation: Mediation is entirely voluntary. Parties choose to engage in the process and can withdraw at any time without any obligation to continue[3].
  2. Control by the Parties: The parties involved retain control over the mediation process and the outcome[4]. They decide whether to settle and on what terms, ensuring that any agreement reflects their interests.[5].
  3. Neutral Third Party: The mediator acts as an impartial facilitator, helping the parties communicate effectively and explore options for resolution. The neutral party who is acting as the mediator does not make the decision or decide how the parties to settle their issues, all he simply does is guide them to reach an agreement on their own[6].
  4. Confidentiality: Mediation is a private process. The issues and subjects discussed during the mediation process are to be kept private and undisclosed between the mediator and the parties, and can only be disclosed if relevant parties consent to it.
  5. Preservation of Relationships: The nature of mediation is designed to keep parties to a dispute in good relations, as there’s no winner or loser in mediation.

The practice of mediation can be traced to early times of civilization, this can be seen in the Nigerian case of Okpuruwu v Okpokam, where the Honourable Justice Oguntade JCA observed that in the pre-colonial times and before the creation of the regular courts we have today, in matters as regarding dispute, Nigerians refer to their elders, or a body set up for that purpose. In the Nigerian system, currently, mediation is rooted as a custom.

What is Arbitration?

According to the Black’s Law Dictionary, arbitration is a method of dispute resolution involving one or more neutral parties who are agreed to by the disputing parties and whose decision is binding. This is another form of alternative dispute resolution where parties to the dispute resolve their dispute without the need to be enclosed within the four walls of the court. Instead, they select an impartial, independent, and neutral third party, who is called an arbitrator. The arbitrator then listens to the parties before him to ascertain the issue and make a decision, which is known as an arbitral award. Since arbitration aims to reduce the burden on courts, upon pronouncement of the arbitral award, such is regarded as final, and courts rarely intervene to reconsider the outcome[7]. According to Halsbury’s Law of England, arbitration is said to be a private instrument for resolving disputes which is binding by an agreement made between two or more parties, and once the arbitrator gives an arbitral award, the parties must follow it, and they cannot change or ignore it, except in rare cases where an appeal is allowed. An arbitrator is a person voluntarily appointed by parties to the dispute or statutorily appointed by the court[8]. The role of an arbitrator in arbitration closely mirrors that of a judge in a court case. The arbitrator acts as a private judge, overseeing the proceedings, listening to both parties and evaluating the evidence presented. Ultimately, the arbitrator is responsible for making a final decision, much like a judge would in a traditional lawsuit[9].

Features of Arbitration

  1. Binding Decision: The decision of an arbitrator is that which in nature is final and binding upon the parties subject to it[10]. Arbitral awards are also easier to enforce internationally than court judgments.[11].
  2. Flexibility: Parties have significant flexibility in designing the arbitration process to suit their needs. This includes selecting an arbitrator and controlling the manner, place and time, the laws to be used, and the language. The process is generally faster and more efficient than court litigation[12].
  3. Party Autonomy: Parties have significant flexibility in arbitration. They can choose the number of arbitrators, the arbitrator(s) themselves, the rules and procedures to govern the process and the language and seat of the arbitration[13]
  4. Neutral Arbitrator: The arbitrator(s) must be impartial and independent. They are similar to judges but are chosen by the parties rather than appointed by the court[14]. The arbitrator must deliver a final and binding decision that is independent of the influence of parties, known as the arbitral award.
  5. Consensual Process: The arbitration process can only commence can only take place if both parties to the dispute agree to it. This can come into creation either through an arbitral clause in their contract or a separate agreement in which both parties consent to arbitration.

Key Differences Between Mediation and Arbitration

  1. Voluntary vs. Binding Nature

Mediation: The process is voluntary, meaning parties can choose to participate and can withdraw at any time. Any agreement reached is non-binding until formalized in a written contract.

Arbitration: This can be binding or non-binding. In binding arbitration, the parties agree to accept the arbitrator’s decision as final and enforceable by law, waiving their right to appeal except on very limited grounds.

  1. Role of the Independent Neutral Third Party

Mediation: The mediator helps the parties communicate with each other and guides them in working towards a solution that both sides can agree on[15]. A mediator does not declare or pronounce decisions or judgments upon parties but helps them reach an agreement.

Arbitration: An arbitrator serves as the decision-maker, hearing both sides of the dispute and making a final ruling based on the evidence and arguments provided. The arbitrator’s role is like that of a judge in a courtroom.[16].

  • Confidentiality

Mediation: The discussions are private and confidential, which helps preserve relationships and sensitive information[17].

Arbitration: While the arbitration process is confidential, the final award may be publicly accessible, depending on the jurisdiction.

  1. Cost and Time Considerations

Mediation: Generally less expensive and quicker than arbitration, with most mediation concluding within a few months.

Arbitration: Typically more costly and time-consuming than mediation, often taking over a year for complex cases.

When to Choose Mediation vs. Arbitration

Factors to Consider in ADR Selection

Take into account the connection between the parties, how complicated the dispute is, whether a binding decision is necessary, and how willing the parties are to work together in negotiations.

Types of Disputes Suitable for Mediation

Mediation is effective for disputes where parties wish to maintain their relationship, such as family matters, neighbour disputes, or business partnerships where ongoing collaboration is necessary.

Types of Disputes Suitable for Arbitration

Arbitration is suitable for commercial disputes, contractual disagreements, or cases requiring a definitive legal resolution, especially when the stakes are high or the issues are complex.

Legal and Practical Implications of ADR

Legal Enforceability of Mediation Agreements

Mediation agreements can be legally enforceable if formalized in writing, but they lack the same binding authority as arbitration awards unless a settlement is reached and documented.

Legal Enforceability of Arbitration Awards

Arbitration awards are generally recognized and enforceable in courts, making them reliable for resolving disputes with a definitive outcome.

Role of Courts in ADR Outcomes

Courts can intervene in arbitration to enforce awards or address procedural issues, but they typically do not interfere in mediation outcomes unless there is a breach of the mediation agreement.[18].

Importance of ADR in Reducing Court Congestion

By providing effective means for dispute resolution outside the court system, ADR plays a crucial role in alleviating court congestion and promoting timely resolutions.

In conclusion, mediation and arbitration are different types of alternative ways to resolve disputes, each with its features, procedures, and outcomes. Mediation is voluntary and collaborative, while arbitration is more formal and binding.

Author(s) Name: Oluwole Israel Olumide (Law Graduate, University of Elizade, Nigeria)

References:

[1] Shonk K, What Is Alternative Dispute Resolution? (PON – Program on Negotiation at Harvard Law School, August 2, 2024) <https://www.pon.harvard.edu/daily/dispute-resolution/what-is-alternative-dispute-resolution/> accessed 6 September 2024

[2] ‘MEDIATION Definition & Meaning – Black’s Law Dictionary’ (The Law Dictionary, 4 November 2011) <https://thelawdictionary.org/mediation/> accessed 6 September 2024

[3] SALIENT FEATURES OF MEDIATION | VIA Mediation Centre. <https://viamediationcentre.org/readnews/MTI0NQ==/SALIENT-FEATURES-OF-MEDIATION> accessed 7 Sept. 2024.

[4]  SALIENT FEATURES OF MEDIATION | VIA Mediation Centre. <https://viamediationcentre.org/readnews/MTI0NQ==/SALIENT-FEATURES-OF-MEDIATION>. accessed 7 Sept. 2024.

[5] Mediator and Mediation Characteristics | VIA Mediation Centre. <https://viamediationcentre.org/readnews/Mzk=/Mediator-and-mediation-characteristics> accessed 7 Sept. 2024.

[6]Mediator and Mediation Characteristics | VIA Mediation Centre. <https://viamediationcentre.org/readnews/Mzk=/Mediator-and-mediation-characteristics> accessed 7 Sept. 2024.

[7] cydni. “Arbitration – Definition, Examples, Cases, and Processes.” Legal Dictionary, 10 Nov. 2014, <https://legaldictionary.net/arbitration/>accessed 8 September 2024

[8] dash, supriya. “Are Arbitrators Lawyers?” Legodesk, 23 Apr. 2019, <https://legodesk.com/legopedia/who-is-an-arbitrator/> accessed 8 September 2024

[9] Parihar, Subhashini. “Appointment, Removal, Functions, and Powers of Arbitrators.” WritingLaw, 22 Apr. 2024, <https://www.writinglaw.com/all-about-arbitrators/> accessed 8 September 2024

[10] Mahawar, Sneha. “Types of Arbitration.” IPleaders, 15 Apr. 2024, <https://blog.ipleaders.in/arbitration-type-significance/> accessed 8  September 2024

[11] Arbitration Features Hainan International Arbitration Court. <https://en.hnac.org.cn/list/59.html> accessed 8 September 2024.

[12] Key Elements of Arbitration Agreements. <https://www.linkedin.com/pulse/key-elements-arbitration-agreements-chetan-kumar-cg7tf> accessed 8 Sept. 2024.

[13] What Is Arbitration? <https://www.wipo.int/amc/en/arbitration/what-is-arb.html> accessed 8 September. 2024.

[14] Mahawar, Sneha. “Types of Arbitration.” IPleaders, 15 Apr. 2024, <https://blog.ipleaders.in/arbitration-type-significance/> accessed 8 September 2024

[15] Mediation Vs. Arbitration: Differences, Pros & Cons – Forbes Advisor. <https://www.forbes.com/advisor/legal/mediation-vs-arbitration/> accessed 8 Sept. 2024.

[16] Edwards, Bruce. “What Is the Difference Between Mediation and Arbitration?” Edwards Mediation Academy, 15 July 2024, <https://edwardsmediationacademy.com/what-is-the-difference-between-mediation-and-arbitration/> accessed 8 September 2024

[17] Mediation Vs. Arbitration: Differences, Pros & Cons – Forbes Advisor. <https://www.forbes.com/advisor/legal/mediation-vs-arbitration/> accessed 8 September 2024.

[18] Edwards B, “What Is the Difference Between Mediation and Arbitration?” (Edwards Mediation Academy, September 5, 2024) <https://edwardsmediationacademy.com/what-is-the-difference-between-mediation-and-arbitration/>accessed 8 September 2024