Mediation vs arbitration: which is right for your dispute?

Mediation and arbitration are the two best known types of ADR, and they are regularly confused. Both keep you out of court proceedings. Both are private. Beyond that they work in almost opposite ways, and picking the wrong one can cost a great deal.

The short answer

In mediation, a neutral third party helps the disputing parties negotiate. The mediator cannot decide anything. Nothing binds anyone unless the parties agree terms and sign them.

In arbitration, a neutral third party decides. The arbitration process ends in an award, and that award is a binding decision enforceable through the courts.

Mediation is about reaching a mutually acceptable deal. Arbitration is about getting a ruling from someone other than a judge.

How mediation works

A mediation is typically booked for a single day. Position statements and a short core bundle are exchanged around a week beforehand. On the day the mediator holds a brief joint opening, then moves into private caucus with each side.

Everything said in caucus is confidential to that room unless you authorise the mediator to pass it on. The mediator will reality test your case, probe your best and worst outcomes at trial, and carry offers between the rooms. Most civil and commercial mediations settle on the day or shortly afterwards.

Because the parties involved control the outcome, mediated settlements can include things no court could order: a revised contract, staged payments, a reference, an apology, a joint statement, or the unwinding of a partnership on agreed terms.

How arbitration works

Arbitration begins with an agreement to arbitrate, usually a clause in the underlying contract. The parties agree an arbitrator or a three member tribunal, often with sector expertise. Directions are set for statements of case, disclosure, witness evidence and expert evidence, and there is normally a hearing.

The arbitrator then produces a reasoned award. Under the Arbitration Act 1996 that award can be enforced with the court's permission as if it were a judgment, and abroad under the New York Convention in more than 170 states. Appeals are tightly restricted, which is a feature rather than a defect: the point is finality.

Cost and timescale compared

Mediation is the cheaper and faster of the two by a wide margin. A full day commercial mediator fee is typically a fixed sum per party, and the whole process from first contact to signed agreement can be complete in four to six weeks.

Arbitration is a full adjudicative process, so it carries arbitrator fees, institutional fees where a body such as the LCIA or ICC administers it, hearing costs and legal representation across many months. It is usually cheaper and quicker than High Court litigation, but it is not a cheap option in absolute terms.

This is why the sensible order, in most disputes, is to mediate first and reserve arbitration for the issues that mediation cannot settle.

Control, confidentiality and relationships

Both processes are private, but they protect different things.

Mediation is without prejudice throughout, so nothing said in the room can be used later if the case does not settle. That freedom is what allows realistic conversations to happen. It is also the reason mediation preserves commercial and family relationships far better than a contested hearing.

Arbitration is confidential as to the process and the award, which matters where reputational damage or trade secrets are in play, but it is still adversarial. One party wins. Relationships rarely survive it intact.

Is the outcome legally binding?

A mediated settlement becomes legally binding when it is signed. If proceedings are already on foot it is usually recorded in a Tomlin order so the terms can be enforced without starting a new claim.

An arbitration award is binding on delivery. Challenges are limited to serious irregularity or, in narrow circumstances, a point of law. For more detail see our guide to whether ADR is legally binding.

Which should you choose?

Choose mediation where the sums in dispute are outstripped by legal costs, where you want to protect a relationship, where you need a creative or commercial solution, or where you simply want the dispute finished within weeks.

Choose arbitration where your contract requires it, where you need an enforceable decision against a party in another jurisdiction, where the dispute turns on specialist technical expertise, or where the other side will not negotiate in good faith.

Choose both, in sequence, where the dispute is large and multi issue. Tiered dispute resolution clauses that require negotiation, then mediation, then arbitration are now standard in well drafted commercial agreements.

Finding the right neutral

The choice of individual matters as much as the choice of process. Clerk&Counsel puts clients and instructing solicitors in touch with accredited mediators and arbitrators, and with practising barristers who conduct ADR and can equally represent you at a mediation or an arbitration hearing.

Send a two line summary of the dispute, the amount in issue and your preferred window. We will come back within one working day with suitable names, availability and a fixed fee. See our commercial mediation and civil mediation pages, or send us a brief.

Common questions about ADR

How long does ADR take?

Most mediations are booked within four to six weeks and settle in a single day. Early neutral evaluation usually takes two to three weeks from instruction. Arbitration takes months rather than years, but longer than mediation.

Do I need a lawyer for ADR?

No, but representation helps. Direct access counsel can prepare your position statement, attend the session and draft the settlement, often for a fixed fee well below the cost of a contested hearing.

Who pays for ADR?

The neutral's fee is normally split equally between the parties unless they agree otherwise. Each side usually bears its own preparation and representation costs.