Legal Guides

We use plain and simple English to give you an overview of the most common areas of law.

Mediation and Arbitration – what’s the difference and should I use them?

The quick answer is yes – it’s much better than entering into expensive and lengthy litigation to resolve a dispute in the courts. Going to court should be the last resort because:

  • It’s expensive
  • A lengthy process of potentially many months begins
  • A judge decides the outcome based upon the evidence in front of him
  • The decision made is imposed upon the parties once and for all.

One of the greatest disadvantages of going to court is that it is an ‘adversarial system’ – in other words, one person against another. There is a winner and a loser and the process is stressful. The process is also public and ADR provides a way in which people can settle their differences privately.

Mediation and arbitration fall under an umbrella term of ‘Alternative Dispute Resolution’ or ADR.  These aim to provide an alternative that can save both personal and professional working relationships.

An easier option is negotiation although parties in dispute may find this difficult to achieve easily without the involvement of solicitors to keep it calm.

What is the difference between mediation and arbitration?

Mediation is a process for resolving a dispute which is entered into voluntarily. This means that both sides must consent to it. The parties will sit down with a mediator and attempt to sort out their differences. The mediator is ‘neutral’ and will encourage discussion and resolution. The mediator does not ‘judge’ or attribute any blame in the dispute. Any agreement that is reached will NOT be enforceable in court by one person against the other. The agreement, once reached, will be recorded in writing.

The major advantage here is cost and speed. Generally, any dispute can be mediated and this ranges from contract disputes to family issues. Mediation usually lasts less than one day.

In small claims of less than £10,000, the courts provide for an automatic referral to telephone mediation. This is successful in a great number of disputes and prevents the claim from going forward to a hearing – in turn this reduces costs and effectively resolves disputes more quickly.

If mediation fails to resolve the problem, then anything that happened in mediation cannot be used later in court. It remains private. This allows the parties to enter mediation with a ‘cards on the table’ approach and to be honest about what they will and will not accept to resolve the dispute.

Arbitration means that the parties agree to the use of a third party who will make a decision to resolve the dispute. The parties also agree that the decision made will be binding. Binding means that it can be enforced through the courts. In other words, the parties will agree to whatever the arbitrator decides.

Arbitration is used most often by businesses to sort out issues that have arisen as a result of breaches of contract in some way. This can involve potential claims for large sums of money. In addition to this type of issue many others use arbitration such as employment disputes and those involving landlords and their tenants.

ACAS is the most commonly known organisation promoting arbitration and it resolves employment disputes. It provides procedures and guidance for both individuals and employers. Further information on ACAS is available here. ABTA is another organisation provding arbitration for disputes relating to travel agents.

Arbitration also provides an alternative to traditional litigation in court and business contracts often contain an ‘arbitration clause’ which is agreed to when the contract is signed.

An arbitration clause simply means that the parties agree that if there is a problem later on, then they will sort it out using arbitration rather than going to court.

In arbitration the parties will appoint an agreed arbitrator (or more than one if necessary). Arbitrators are experienced in their relevant areas and they can be found in the lists held by the Chartered Institute of Arbitrators. Where a person is legally represented, it is likely that their solicitor would be able to suggest an experienced arbitrator.

The experience of the arbitrator means that they can act impartially in a ‘judicial’ way and do not need the evidence of another expert to reach a decision. Arbitration is more formal than mediation and the decision made is final but will not be made public.

Arbitration fees can be high, particularly in commercial disputes, but often the cost is outweighed by the fact that the problem can be sorted quickly rather than needing many months to reach a trial. The decision of the artbitrator is final although if the law has not been used correctly to make the decision then a party can appeal to the court to ask them to look at it again.

Both arbitration and mediation are much more accessible than dealing with complicated court processes. They are also much faster and cheaper. This does not mean that a person does not need to seek legal advice – especially in business disputes.  It does, however, generally result in a situation in which personal and business relationships are more likely to be saved.

Finally, the courts have encouraged ADR and the use of this is now commonplace. If one person wants to mediate a dispute and another refuses and the dispute later goes to court, the judge will not look favourably upon a person who has refused all types of alternative solutions.  The possible result of that will be that the court will not give an order for a person to recover their costs even where they ‘win.’

Be aware that disputes can be settled in more than one way and all solicitors will offer advice on the best way for a dispute to be resolved. If in doubt, seek advice.

Suzanne Alexander

Lecturer in Civil Litigation at  Worcester Law School

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. 

Published on 23rd June 2016
(Last updated 7th May 2021)
Posted in ADR