Mediation and Arbitration are not Mutually Exclusive

In circumstances where a dispute has been set down for arbitration, participation in mediation beforehand can greatly facilitate the dispute resolution process. There is no need for concern that the mediation process may somehow preclude a party from later engaging in arbitration, if that is later needed.

Both arbitration and mediation have their pros and cons as a forum for dispute resolution.

Arbitration:

Arbitration is a formal dispute resolution process where the dispute between parties is heard and determined by an arbitrator. Arbitration usually occurs when a clause in the agreement or contract specifically states that arbitration is the mandatory dispute resolution forum.

While arbitration may be an effective forum for dispute resolution involving cross-jurisdictional matters, and has the virtue, especially within larger organisations and corporations, of keeping a company’s ‘dirty laundry’ in house, the fundamental limitation of the arbitration process is that only the parties to the agreement can be involved in the proceeding. You cannot consolidate proceedings or join parties to a proceeding. In some cases, it can be a process that is just as lengthy and cost consuming as court litigation.

In many situations arbitration is a costly and time-consuming exercise, with the fees for an arbitrator often amounting to thousands of dollars per day. In addition, the parties must pay for room hire and associated costs.

Some parties may have the false impression that if they agree to participate in mediation then the arbitration would be abandoned. This is not so. Mediation and arbitration are not mutually exclusive.

Mediation can greatly reduce the overall cost and duration of litigation, as even if there is no overall settlement, the issues in dispute can be narrowed.

Mediation:

Mediation is a more informal process than arbitration. The process can take place with short notice, and be of a short duration, for example one day. It is confidential and if the issues are not resolved then the arbitration process can continue on foot.
Mediation has distinct advantages such as:
• Isolating the main issues in contention;
• Resolving some or all of the issues;
• Reducing the cost of the overall proceeding;
• Reducing the timeframe of the overall proceeding.

Mediation can be easily arranged and facilitated, and even in cases where the mediation runs for just 2-3 hours, significant in-roads can be made towards resolution.
The costs involved in mediation are significantly lower than those for arbitration, for example the costs of a mediator and room hire fees are most likely going to be less, and there is no real “lead in” interlocutory process beforehand.
Mediation is a valuable dispute resolution process and need not delay or negate arbitration but rather it can form synergy with the overall proceedings.
It should be noted that the outcome of mediation is only binding on the parties by agreement and the mediator does not have powers to make orders.

Mediation will only succeed if both parties approach the situation with good faith. There is little value in recommending mediation in circumstances where one party has a strong reluctance to participate or to make any compromise.
Expert legal advice should be sought early in a dispute resolution process in order to maximise the cost efficiency and benefit outcomes of what could become a lengthy and cripplingly expensive proceeding.

For more information on the various forums for dispute resolution, including a detailed analysis by Conjoint Professor Kim Lovegrove, FAIB click on the following links:
Mediation – Pros and Cons
E-books

The Lovegrove Smith & Cotton E-Library is a free online resource of articles, which puts a wealth of information at your finger tips. The articles in the E- Library have been written by lawyers and a number of them have been published in the Australian, The Age and the Herald Sun. Some of the articles date back to the 1990’s. To access click here.

© Lovegrove Smith & Cotton 2014