Difference between Arbitration and Mediation

Arbitration and mediation are an alternate system of resolving disputes between parties. Judiciary is overburdened due to pendency of cases and to reduce the stress of Indian judiciary provisions of arbitration and mediation are made. Arbitration and Mediation appears similar to the layman but in actual fact there are a lot of differences.

Mechanism:

These mechanisms are alternate methods of solving disputes. It involves arbitration, mediation, conciliation and mediation. It involves settling disputes between parties through negotiation and not traditional forms of litigation. These mechanisms were prevalent in India since olden times in the form of Panchayats.  This is an Act that is in force today, and it has been amended thrice in 2015, 2019 and 2021. This system came into existence primarily for promoting out of court settlements but other objectives are:

1. Affordable and speedy trial
2. Settling disputes through negotiation and compromise
3. Working on principles of diplomacy
4. Creates pre disputed guidelines

Arbitration:

Arbitration means settlement of a question at issue by one to whom the parties agree to refer their claims to obtain an equitable decision. Arbitration can be classified as: a) domestic arbitration b) international arbitration 

Section 2(1)(f) defines international commercial arbitration. The three approaches are the nature of the dispute, the nationality of the parties, and the mixture of the first two in addition to a chosen place for arbitration. Indian law has adopted nationality as the subject matter to define international arbitration. By “domestic” it means both the parties are from India.

Mediation:

It is a binding process, at the choice of Parties, where one neutral mediator helps the parties to reach the settlement. Mediator does not impose the settlement decision but creates the conducive environment where Parties can resolve their disputes.

Benefits:

1. Preferable outcome
2. Lower Cost
3. Preservation of Relationship
4. Confidentiality
5. Flexibility

Arbitration V. Mediation

1. Mediation is when a neutral third party aims to assist the parties in arriving at a settlement at a mutually agreeable solution whereas arbitration is like litigation which is outside the court where award is an order.
2.  Mediation is not binding on the parties but arbitration is.
3. Mediation is more collaborative, and arbitration is more adversarial.
4. The process of mediation is more informal than that of the process of arbitration.
5. The outcome of mediation is controlled by the parties whereas in arbitration it is controlled by the arbitrator.
6. In mediation, the dispute may or may not be resolved whereas in arbitration it is always settled in either party’s favour.

It is evident that arbitration and mediation are 2 different types of alternative dispute resolution systems. Mediation is more discussion oriented  whereas arbitration is more litigation based and is a good way to settle disputes.