What is the difference between Arbitration and Mediation?

About mediation and arbitration

Generally, the process of mediation aims to guide the parties to a formation of an agreement. The mediator cannot force any of the parties to any sort of settlement, all he/she can do is to guide the parties and help them format the agreement between them. In the case of arbitration, the parties entrust the arbitrator with full authority to decide regarding the dispute. Due to the great responsibility that rests on the arbitrator, he/she should maintain a code of conduct as if it was a legal procedure.

Mediation

The legal anchoring of mediation is in the Law of Courts [Consolidated Version] from 5744 – 1984. The aim of the procedure – to enable the parties to choose how to settle the dispute between them, and thus saving valuable judicial time and resolving the conflict more quickly.

In the mediation procedure, the mediator meets with the parties (together or separately), with the intent to help them reach an agreement that will enable the end of the dispute. The mediator will work with the parties to find out what the subjects of dispute are and will provide information and suggestions to ending the dispute.

The concept of mediation is that it is always best to have direct communication between the parties, which have the best chance (and knowledge) to reach the best solution, which is not always the case with a judge or arbitrator.

Unlike an arbitrator or judges, the mediator doesn’t have the authority to decide and to force a solution on the parties. The mediator will aid the parties to promote their matters and interests. The mediator is there to help the parties come to an agreement about the way to settle the dispute, by negotiations – again, without having the ability to make the actual decision. By promoting understanding, reconciliation and communication between the parties, the mediator provides them with the key to formulating a good agreement for both sides, which will be effective and beneficial for both short and long terms.

The mediator will have a few meetings with the parties; he/she may also ask to meet with one or both sides separately, as he/she sees fit. Mediation is a proses where the parties start in a situation of conflict and controversy and end in an agreement. The end of this proses is formulating a mediation agreement. This agreement can be presented to the court and you can ask that is be validated as a verdict.

Anything said during the mediation procedure, in general, and to the mediator in particular, is confidential and cannot be used in court. The mediator is not allowed to testify in court regarding matters related to the conflict. Even though the mediator is a lawyer, he/she is not permitted to advise the parties in legal matters and if necessary, he/she will refer the parties to a different lawyer, before the agreement is signed.

Benefits of Mediation

  • Due to the load on the courts, a regular lawsuit can take a very long time. Mediation can speed up the proses of formulating the agreement and, in any case, much sooner than the court could give a verdict.
  • The goal of the mediation process is to bring the parties to talk to each other, which is unlike the advisory system the court, thus sparing the parties much emotional stress.
  • Mediation enables the parties to express themselves in a non-formal, comfortable and relaxed way, unlike in the court.
  • The agreement formed at the end is a product of a proses which brings the parties to a point where they can agree but, it still must stay within legal and social rules that guarantee that there will be no discrimination against any of the parties.
  • The agreement that is reached, as mentioned before, may be brought before the court, which will give it the validity of a verdict. So in effect, the agreement constitutes a verdict formed by the parties with their own hands.
  • Due to the fact that the agreement is a product of the parties consent, it will reflect their choices thus sparing them of arguments, anguish and appeal procedures after the verdict.
  • If the mediation proses fails, the parties still have the option of going to court and other ways to settle the dispute between them.

Arbitration

The Arbitration Law 5728- 1968 is the normative source which regulates the arbitration procedure. In the past, the procedure was strict and it was difficult to appeal against the arbitrator’s verdict, in 2008, an amendment to the Arbitration law was passed and today the law allows the parties to determine whether and how the appeal against the arbitration verdict will be done. The composition of courts of appeal and even their identity will be determined with the parties consent.

The arbitration procedure too starts with consent between the parties but here they will choose an arbitrator, who’s decision regarding how to end the dispute will be acceptable to both of them. The arbitration agreement will include the identity of the arbitrator and, as mentioned before, the ways – if at all – to appeal against the arbitrator’s verdict.

The arbitrator in the proses is like a sort of a judge: the parties will present their claims to him/her and he/she will decide how to rule on the matter. The Arbitration law authorizes the arbitrator to aid the parties to come to a quick and committing decision regarding the dispute, out of the court.

Because of its efficiency, many offices and corporations add, in contractual agreements a stipulation regarding arbitration that, if there is a dispute, the resolution shall be done by arbitration. After the Arbitration law was amended, arbitration became more and more common; the amendment allayed the parties’ fears regarding past difficulty to appeal the arbitration’s verdict.

Any  person can be an arbitrator, it is best that the arbitrator be an expert, as arbitration with an expert can save much effort and resources that might have been invested in a regular judicial procedure.  In addition, the arbitrator is allowed to use his/her personal knowledge to come to a verdict in the dispute, which is not the case in a regular judicial procedure.

Benefits of Arbitration

The main benefit of arbitration is that the decision can be given within three months, with the option of an extension of three extra months. So, the decision can be given within six months of appointing the arbitrator and signing the arbitration agreement, or, the partied could decide on a longer period of time. Unlike the mediation procedure, the arbitration procedure is much more final.

Another advantage of arbitration over the court is saving in costs. In the court, the parties are required to pay the court toll which is 2.5% of the total amount of the claim. In addition, the lengthily hearings and their encumbrance, due to evidence law, could cause in many cases quite large legal costs. To that you must add the cost if one of the parties wants to appeal the verdict.

In the arbitration agreement, you can determine the fee of the arbitrator ahead or decide on an hourly fee or per meeting. Because the arbitrator is allowed to use personal knowledge in the arbitration, you can save on bringing experts in fields known to the arbitrator. It is important to know that, within the procedure of pre-trial, even after filling to the court, you can transfer the case to arbitration and the parties can get back the fee paid (or part of it, according to regulation).

When choosing an arbitrator, it is best to make sure that, in addition to his/her knowledge of the subject in dispute, he/she is a lawyer so he/she could determine in legal issues such as limitation and changing or extending the sum of the claim during arbitration. The arbitrator is allowed to decide on temporary relief, an interim award and to decide regarding the allowed interest rates. The law authorizes the arbitrator to appeal to the court with a clarification request but this requires extra fees and commission etc.

If the arbitration agreement signed by the partied is valid and legal, it cannot be annulled and the parties cannot approach the court before the arbitration procedure has been exhausted. When drafting the agreement, it is advisable to include all issues the parties disagree upon so as to authorize the arbitrator to discuss them, and to avoid extra conflicts in the future and during the arbitration itself, about the validity of the arbitration agreement.

The arbitrator is allowed to call witnesses, examine witnesses and to award costs for witness fees, as the court can. The arbitration will be documented in the minutes (written or recorded). The arbitration procedure requires full disclosure; therefore arbitration meetings always take place in the presence of all parties. Various requests of the parties of the arbitration, may be submitted strictly in writing.

This article is not intended as legal advice and should not be relied on it as such.