What is Mediation? – What is Arbitration?

Mediation and Arbitration are both ‘ADR’ (Alternative Dispute Resolution) processes. That means that they are processes for legally resolving disputes that arise in franchising arrangements that are an alternative to judicial determination after litigating disputes in a court of law.

According to NADRAC (the Federal Government’s ADR Advisory Council) the main types of ADR are mediation, arbitration and conciliation. There is often confusion as to the use of arbitration and confusion with litigation.

NADRAC has defined mediation as “a process in which the participants, with the assistance of the dispute resolution practitioner (the mediator), identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement“. The mediator assists the parties to explore, examine and exchange views that lead to a resolution.  The mediator can work by taking each issue and focussing the parties discussion to uncover their particular needs. Or conduct a more wide ranging exploration about the nature of the parties commercial relationships to uncover mis-matches in their expectations. The mediator is a knowledgeable facilitator of the parties discussions but does not make a binding decision, rather leaving t to the parties to finalise their agreements in some form of binding arrangement.

NADRAC defines arbitration as: “a process in which the parties to a dispute present arguments and evidence to a dispute resolution practitioner (the arbitrator) who makes a [binding] determination“. Arbitration (despite its binding character) is also seen as an alternative process to litigation as the arbitrator is selected by agreement between the =parties. Arbitrators are generally experts in the field of the dispute, commercial experience and a knowledge of the law. Despite its private character, arbitrators are often in a greater position to determine a dispute than a judge. Unlike judges who are required to determine a dispute solely on the evidence presented (or prevented from being given) to them, arbitrators have an investigatory power and can initiate a search to uncover the “real” issues in a dispute.

When they are used together as part of a single resolution system, we describe it as a “hybrid” or “med-arb” process. When used together, participants are able to obtain the benefits of both systems of dispute resolution. The flexibility of mediation assits with wide ranging and confidential discussions. The finality of arbitration allows the parties to obtain a quick, binding decision that can be made into an award.