Due to its vast population and a complex and time-consuming judicial system, the backlog of cases becomes a challenge in India. This staggering pendency of cases has led to the adoption of Alternative Dispute Resolution (ADR) mechanisms such as arbitration and mediation. These methods offer faster, cost-effective, and less adversarial ways to resolve disputes. Both of these processes, Arbitration and Mediation, aim to divide and alleviate the burden on courts. These methods of dispute resolution are different from the conventional court system.
| Arbitration | Mediation | |
| Nature of the Process | With a formal structure, arbitration is a quasi-judicial process. Evidence, witnesses, and legal arguments are presented before an arbitrator. Adjudication is done by an arbitrator based on the applicable law. Although the Arbitration and Conciliation Act, 1996, follows a flexible procedure, it mandates adherence to the principles of natural justice. It is similar to the proceedings of the court, such as written submissions, oral arguments, and a binding decision. | Mediation is an informal and collaborative process. Dialogue is facilitated, keeping in mind the interests of the parties, but the decision is not bound in mediation. Section 6 of the Mediation Act, 2023 states that disputes mentioned in the first schedule of the act cannot be resolved through mediation, like criminal offenses, proceedings before SEBI, and many more. |
| Applicability | Generally, arbitration is preferred in commercial disputes involving contracts and international trade. | However, the Legal Services Authorities Act, 1987, promotes mediation through Lok Adalats, which resolves disputes through consensual agreements. Mediation is used to resolve conflicts in various areas, including matrimonial, consumer, employment, and community matters. |
| Binding Nature of the Outcome | Section 34 of the Arbitration and Conciliation Act, 1996 provides the grounds to challenge an arbitral award. Still, there are limited grounds, such as a lack of information about the proceedings and an invalid arbitration agreement. Although it is binding and final, it can be challenged on specific grounds. Domestic awards are enforced as a decree, whereas foreign awards are enforced as per the provisions of Part II of the Act, as the New York Convention awards and Geneva Convention awards. | The outcome of mediation is a settlement agreement, which is binding only if both parties agree and sign it. Under section 27 of the Mediation Act, 2023, it is mentioned that the settlement agreement will be enforced as per the provisions of the Code of Civil Procedure, 1908. |
| Role of Neutral Third Party | In arbitration, the key responsibility of the arbitrator is to act as a decision-maker by evaluating evidence, witnessing, and applying all the legal principles. Arbitration generally opts for experts in a particular field to become arbitrators. | Mediation is just a method of facilitating, not a decision-making process. The mediator guides, manages conflicts, and offers solutions, but does not impose them. The mediator is a facilitator, not a decision-maker. They guide discussions, manage disputes, and propose solutions without imposing them. The Mediation Act, 2023, Section 8, provides for the appointment of a mediator. |
| Officers | Arbitrators are often retired judges or legal experts, lending credibility to the process. | Mediators may include trained professionals, social workers, or community leaders. |
| Confidentiality | Arbitration is a confidential process, but it varies in different scenarios. Section 42A of the Arbitration and Conciliation Act, 1996 (as inserted with the amendment of 2019), mandates confidentiality of proceedings, except for the award. Such an award may be disclosed for enforcement. | Mediation is strictly confidential. Disclosures are not permitted unless the parties give consent. Confidentiality is a significant advantage in both processes, but mediation’s stricter protections make it ideal for sensitive disputes, such as matrimonial or trade secret cases. |
| Cost & Time Efficiency | Although arbitration is faster than litigation, it can be costly, especially in cases involving multiple arbitrators or complex issues. | Mediation is a less expensive and quicker method. It avoids formal procedures, which reduces both cost and time. |
Arbitration and mediation serve as essential methods in the world of Alternative Dispute Resolution. These methods help the judiciary in many ways by addressing the concern of overburdening and resolving various types of disputes outside the court. The best part about arbitration is that the award passed in this process is binding in nature. In mediation, parties are given enormous importance, and they are guided to resolve the dispute most suitably. In India’s ADR machinery, addressing the judicial system’s overburdening while catering to diverse dispute types. While arbitration offers finality and enforceability, mediation provides flexibility and cost-effectiveness, making both complementary rather than competing mechanisms. For businesses, arbitration ensures legal certainty, while mediation covers relationship preservation. For individuals, mediation’s accessibility and cultural resonance make it an easy way out. For legal assistance, contact us.
