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Alternate Dispute Resolution Mediation V/S Arbitration

Alternate Dispute Resolution (ADR) is a process by which disputes between the Parties are resolved amicably without the parties opting to file Court Proceedings. Generally, court proceedings are time consuming and involve substantial costs to the parties. Hence Alternate Dispute Resolution processes are now preferred by Parties over filing legal proceedings before any Court of Law.

ADR consists of two most popular processes namely Arbitration and Mediation.

In the rapidly growing complexities of Commercial transitions both local and International, most Commercial Contracts contain a clause providing for ADR in case of any disputes or differences arising between the parties to the Contract. Most Commercial Contracts provide that in case of any dispute or difference arising between the parties to the Contract or regarding interpretation of any of the Clauses of the Contract , the parties would first try to amicably resolve the dispute within a fixed time frame and in case the dispute is not resolved within the time frame laid down in the contract in that event the said dispute would be referred to Arbitration either to a sole Arbitrator appointed by mutual consent of both parties or to an Arbitral Tribunal consisting of one Arbitrator to be Appointed by each party and the two Arbitrators so appointed would then mutually appoint a third Arbitrator as the Presiding Arbitrator.

Mediation is the Process by which both Parties come together and mutually appoint a third neutral person to act as the Mediator who would then endeavor to bring about an amicable settlement between the parties. In the process of Mediation, both parties come together and each party puts forward their view point and interpretation of the Contract. The Mediator then gives his suggestions to both parties with the ultimate goal of trying to bring about an amicable settlement between the parties. If the parties to the dispute finally come to a mutually agreed amicable settlement, the terms of settlement between the parties are put in writing and are then signed by both parties to the dispute. A Mediation Agreement is not independently enforceable. In case any party to the Mediation Agreement backs out or fails to honor the written duly signed terms of settlement, the only remedy available to the other party would be to file appropriate legal proceedings in a competent Court of Law for breach of the agreed terms of the Mediation Agreement.

The advantages of Mediation are:

  1. Mediation takes place in an informal environment enabling both parties to freely express their respective Viewpoints.

  2. The outcome of Mediation is much quicker than the outcome in Court Proceedings.

  3. Mediation is much more cost effective compared to Court proceedings .

The disadvantages of Mediation are;

  1. Settlement arrived at under the Mediation Agreement is not independently enforceable

  2. In case any one party to the Mediation proceedings has greater power and influence over the other party, settlement by Mediation may not be possible. The Mediator is only a facilitator and cannot enforce his view point on any of the Parties to the dispute.

Arbitration on the other hand is a quasi-Judicial proceeding governed by the Provisions of the Arbitration and Conciliation (Amendment) Act 2015 and statutory modifications made thereto from time to time. Arbitration Proceedings are governed by the Arbitration Clause in the Contract. In Arbitration Proceedings Party autonomy is paramount. The Parties to the dispute have the sole discretion to Appoint either a sole Arbitrator mutually agreeable to both parties or each party to the Dispute can appoint an Arbitrator of their chose and the Two Arbitrators so appointed shall then mutually appoint a third Arbitrator as the Presiding Arbitrator. The Sole Arbitrator or the Arbitral Tribunal shall then proceed to hear both parties, lead evidence if they feel it necessary and thereafter pass an Award which is final and binding on both Parties.

The advantages of Arbitration are:

  1. The outcome of Arbitration proceedings is much faster compared to Court Proceedings. As per the amendments made in the Arbitration and Conciliation 9 Amendment) Act 2015, Arbitration proceedings have to be completed within one year from date of completion of pleadings, whereas court proceedings take a much longer period for completion.

  2. Court proceedings are strictly governed by established procedures, whereas in Arbitration proceedings procedure need not be strictly followed by the Arbitrator/s.

  3. All proceedings filed before the Arbitrator/s are strictly confidential, whereas all Court proceedings fall within the Public domain.

  4. The Award passed by the Arbitrator/s is final and binding on both parties and is enforceable as a Court Decree.

To conclude Arbitration and Mediation being the two most popular methods of ADR, it is for the Parties to the dispute to decide which method is mutually beneficial to both the parties.




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