FAQ's
Arbitration and Mediation Frequently Asked Questions
Deciding whether arbitration, mediation or litigation is an appropriate method to resolve a commercial dispute can be a daunting and potentially confusing task. Here we outline the key differences between each different form of dispute resolution in our arbitration and mediation FAQs.
Frequently Asked Questions
- What is arbitration?
- What is mediation?
- What are the differences between arbitration, mediation and litigation?
- What are the advantages of arbitration?
- What are the advantages of mediation?
- How can an arbitration start?
- How is the arbitrator appointed?
- Does the arbitrator have to be a lawyer?
- How and where does an arbitration take place?
- What does the arbitrator have to do?
- What are the powers of an arbitrator?
- How is the arbitrator paid?
- How can a mediation start?
- How is the mediator appointed?
- Does the mediator have to be a lawyer?
- How and where does the mediation take place?
- What does the mediator have to do?
- What are the powers of a mediator?
- How is the mediator paid?
- Isn't a willingness to mediate seen by the other party as an admission of weakness?
What is arbitration?
Arbitration is an alternative to litigation and mediation to resolve a dispute. An independent, trained arbitrator, agreed by the parties or centrally appointed, considers documents and/or hears oral evidence and arguments to determine the dispute, including any specific issue(s) agreed as relevant by the parties.
What is mediation?
Mediation is an alternative to litigation and arbitration to resolve a dispute. An independent, trained mediator, agreed between the parties, meets the parties and helps them to find a mutually acceptable outcome to their dispute.
What are the differences between arbitration, mediation and litigation?
- Arbitration is a process, set out in the Arbitration Act 1996 yet largely controlled by the parties, that the parties may already have agreed or may agree following a dispute arising, to use to resolve their dispute or any agreed issue(s). The independent arbitrator appointed decides the dispute, including any interest and costs, by an award between the parties. An award is binding and can be enforced through the courts.
- Mediation is a process that the parties may already have agreed, or can agree following a dispute arising, to use to try to resolve their dispute. The independent mediator does not decide the dispute but facilitates its resolution by the parties themselves. Any settlement decision reached is only binding once confirmed by the parties in writing and signed or when made into a consent court order (where court proceedings have already been issued).
- Litigation is the process of resolving a dispute through the courts, on payment of court fees when a claim is issued and at later points in the court process. The judge is a public servant who is paid by the state.
What are the advantages of arbitration?
Arbitration is normally cheaper and faster than litigation but can achieve similar outcomes. The process is confidential, simple, set out clearly in the Act, and allows the parties to retain a high degree of control.
What are the advantages of mediation?
Mediation is normally the fastest option with the parties retaining a high degree of control. The process is confidential and without prejudice (until a settlement agreement is signed).
How can an arbitration start?
There has to be an agreement in writing to arbitrate. This can be agreed by the parties at the outset, eg as the intended dispute resolution provision in a contract, or only once a dispute has arisen.. One party must then serve notice on the other(s) that it is invoking the arbitration agreement.
How is the arbitrator appointed?
The parties may agree on an arbitrator and if they cannot, then the arbitration agreement may specify the process, eg to be appointed by the President of the Law Society. In limited circumstances the court may be asked to appoint the arbitrator.
Does the arbitrator have to be a lawyer?
No, while arbitrators are often lawyers, due to some of the court-like processes involved in arbitration, any person who has been duly trained and certified may act as an arbitrator.
How and where does an arbitration take place?
The parties may agree and ask the arbitrator to decide the dispute just on paper or by hearing oral evidence and submissions instead or as well. If the parties cannot agree the arbitrator may seek to influence the parties and in the last resort can impose a process on the parties.
What does the arbitrator have to do?
In deciding the issue(s) agreed by the parties or necessary to resolve the dispute, the arbitrator must act fairly and impartially between the parties, adopt the most suitable and fair procedure to resolve the dispute and avoid unnecessary delay or expense. Once paid the arbitrator must issue an award setting out the result, giving reasons if asked by the parties to do so.
What are the powers of an arbitrator?
In broad terms an arbitrator has all the powers of a High Court judge.
How is the arbitrator paid?
Unless the parties agree otherwise, the parties either share the arbitrator's fees or pay them (or repay all or part of any fees paid in advance) as set out in the award.
How can a mediation start?
Mediation may be the contractually agreed step in a dispute resolution process or the parties can agree to mediate at any point, even if litigation or arbitration is already underway. The court cannot impose mediation on the parties but it can penalise one or both of them later by a costs order if the court feels that they have unreasonably refused to consider mediation or have not acted in good faith during mediation.
How is the mediator appointed?
By agreement between the parties, who normally suggest a number of alternatives to each other. Care may be needed if the mediator would benefit from specialist expertise, eg to more readily understand a specific topic, but generally it is not vital for a mediator to have any specific subject matter expertise.
Does the mediator have to be a lawyer?
No, although a working knowledge of how other dispute resolution options, particularly litigation, work, the relative advantages and disadvantages and comparative likely cost, help a mediator.
How and where does the mediation take place?
It is for the parties to agree the date, location and necessary facilities for the mediation, although many mediator organisations, VWV Mediators included, offer mediation facilities as part of the mediator's costs or for limited additional cost.
What does the mediator have to do?
The mediator will explore with each party in private the strengths, weaknesses, costs and other risks and any opportunities of their case against what they wish to achieve. The mediator will then use whatever means are most likely to assist and enable the parties to identify and then achieve common ground sufficient to allow the dispute to be settled. Mediation is not constrained by the rules and procedure of a court.
What are the powers of a mediator?
The mediator has no powers, merely tries to use the persuasive dynamics of having the parties, their legal advisers, if any, and any ultimate decision maker, eg an insurer, present at the same time in order to bring about sufficient changes in the parties positions to resolve the dispute.
How is the mediator paid?
Normally by the parties in equal shares in advance of the mediation meeting.
Isn't a willingness to mediate often seen by the other party as an admission of weakness?
No. Trying to resolve a dispute by any legitimate means without involving litigation is a rational, sensible and commercial step, which recognises that litigation is an inherently uncertain and very costly exercise. Remember that each party's own time involved in litigation is not, and all its legal costs are seldom, capable of being recovered from the losing party anyway.
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