The Difference Between Arbitration and Mediation

The Difference Between Arbitration and Mediation

Arbitration and mediation have gained significant attention in recent years, and their scope of application continues to expand. In many situations, a natural or legal person may become involved in a dispute with the other party to a contract and seek a faster and less costly method of dispute resolution than litigation in court.

In such cases, arbitration and mediation are commonly considered. Although both mechanisms serve as alternatives to judicial proceedings, they differ in several material respects, which are examined below.

Comparison of Arbitration and Mediation in Terms of Process and Outcome

Concept of Arbitration

Arbitration arises when the parties to a dispute agree to resolve their dispute without formal judicial proceedings and outside the court system, by one or more arbitrators. This agreement may be incorporated into the contract either before a dispute arises or after a dispute has occurred. The arbitrator may be a natural person or a legal entity. Speed, trust, and confidentiality are key features of arbitration.

Disputes That Cannot Be Referred to Arbitration

Certain categories of disputes are not subject to arbitration under the law. Article 478 of the Iranian Civil Procedure Code specifies these disputes as follows:

• Disputes relating to marriage, such as annulment or dissolution of marriage.
• Disputes concerning lineage, including claims for denial of paternity or establishment of parentage.
• Criminal matters fall outside the jurisdiction of arbitration.
• The issuance of bankruptcy judgments.

Advantages and Benefits of Arbitration

• Arbitration provides a mechanism for the swift resolution of disputes.
• It is generally less costly than court proceedings, as it does not involve standard court filing and procedural fees.
• Arbitration proceedings are conducted confidentially and are not open to the public.
• The arbitrator is selected by mutual agreement of the parties, allowing them to determine both the method of dispute resolution and the arbitrator. The chosen arbitrator should possess sufficient expertise and experience in the subject matter of the contract.
• Arbitration sessions are typically conducted in a calmer environment than court hearings, allowing the parties to present their.
• arguments with less stress.
• The parties may appoint a specialist arbitrator with expertise relevant to the dispute, which can be beneficial to both sides.

Persons Ineligible to Serve as Arbitrators

Pursuant to Article 469 of the Iranian Civil Procedure Code, the following individuals may serve as arbitrators only with the mutual consent of the parties:

• Persons under the age of twenty-five.
• Individuals who have a direct interest in the dispute.
• Persons who have blood or marital relations with either party.
• A guarantor, guardian, attorney, or agent of one of the parties.
• Persons who, or whose spouses, are heirs of either party.
• Government employees acting within the scope of their official duties.

After reviewing the parties’ defenses and evidence, the arbitrator issues a decision within the prescribed period. This decision is binding and enforceable in the same manner as a court judgment.

Concept of Mediation

Mediation is a process in which a trained third party, known as a mediator, assists the disputing parties in reaching a mutually acceptable settlement. This process occurs outside the court system and involves the complainant, the respondent, and any other individuals whose participation may facilitate reconciliation.

If a settlement is reached, the parties’ rights and obligations are determined by their agreement.

Benefits of Mediation

• Mediation helps preserve amicable and cooperative relationships between the parties.
• The parties incur lower costs compared to formal litigation.
• Disputes are resolved more quickly through mediation.
• The process takes place in a calm and non-adversarial environment.
• The solutions reached are often creative and tailored to the parties’ specific needs.

Similarities Between Arbitration and Mediation

• In both methods, disputes are resolved outside the court system.
• Both methods are generally less costly than judicial proceedings.
• Dispute resolution is faster in both approaches.
• There is no mandatory legal obligation to refer disputes to an arbitrator or mediator.
• The use of both methods depends on the parties’ agreement.
• Both mechanisms contribute to reducing the volume of court cases.
• In both processes, the environment is considerably more relaxed than in court proceedings.

Differences Between Arbitration and Mediation

In arbitration, the arbitrator has the authority to issue a binding decision. In contrast, a mediator does not have the power to issue a decision and is limited to guiding the parties toward settlement through discussion and negotiation.

Arbitration is subject to legal limitations regarding the types of disputes that may be referred to it, while mediation offers greater flexibility.

Witnesses may appear in arbitration proceedings, whereas in mediation sessions, they are not present; however, reliance on witness statements may be possible.

Frequently Asked Questions About the Difference Between Arbitration and Mediation