The Difference Between Negotiation, Mediation, Arbitration And Court Litigation
As a dispute resolution lawyer of more than 26 years, the most common question which I get asked is the difference between negotiation, arbitration, litigation and mediation. I understand why such a question may be important. Knowing the answer helps my client decide which option to choose. I must admit there is no easy answer to such a question. Why is this the case?
It is likely historical on account of traditional law school training systems. I recall my training as a barrister in the UK was mainly to teach me court litigation skills. This is the traditional method by which disputes are resolved. Through the years, alternative forms of dispute resolution mechanisms have developed. Negotiation and mediation skills were mainly taught either in Business Schools or Schools of Social Sciences. Much has now changed. I am glad to see that many law schools, especially here in Singapore, have incorporated mediation skills into their curriculum. I am confident that in the years to come, negotiation skills will come to be taught as well.
Having the formal training in all the 3 skill sets, I now offer an explanation of their differences. For arbitration and litigation, it is the art of presenting evidence and the law to a judge or decision maker. Arbitration is usually a selected choice where one of the parties is foreign and/or parties desire to keep the contents of the dispute confidential
Negotiation is the art of communicating with the other side so that a mutually acceptable outcome can be achieved. Mediation take place when the parties appoint a neutral third party to facilitate the negotiation process.
What is Mediation And Its Process?
The Mediation Process is like a confidential meeting between disputing parties with the assistance of a neutral third party (who is also known as the “Mediator”). The Mediator will not be involved in later court proceedings should mediation fail. Unlike a court setting, mediation is less formal and is conducted in a more informal setting. The role of the Mediator is not to determine who is right or wrong. Instead, the Mediator’s job is to facilitate the meeting and help parties to uncover the root causes of the problem. Hopefully, parties will voluntarily and by themselves come to an agreement.
I have often been asked whether parties themselves can try to negotiate themselves without a Mediator? After all, many would say the ability to negotiate is instinctive and we are born to negotiate. While seeminly so, the actual process and skills are not instinctive. A trained Mediator, using formal techniques and following a process will likely yield a better result than someone who is doing this instinctively.
Typically, the mediation process involves 4 parts. The initial steps are to identify the issues, explore and generate options. At the same time, the Mediator will also encourage parties to communicate with each other. The final part is where the Mediator will facilitate parties to voluntarily arrive at a settlement.
Cost Differences Between Mediation, Arbitration and Court Litigation
In terms of cost, it is plain to see that negotiation is the least costly way to resolve a dispute. Moving up the scale will be mediation and lastly arbitration and court litigation. Ironically, in my experience, nearly all of my clients come to me asking for assistance in arbitration or court litigation. They make the assumption that the other party (or their lawyers) are “bad people” with “bad motives”, therefore negotiation and mediation are not possible.
Usually, parties will share the cost of a private mediation session. The cost includes the mediator’s fees, as well as rental fees for the meeting room.
Why Choose Mediation Over Court Litigation
Statistics have shown that normally people are not “bad” or harbour “bad motives”. It is a cognitive bias to think so. More often than not, it is because they themselves are poor negotiators or they have appointed poor mediators.
As the financial crisis deepens due to the covid-19 pandemic, many SMEs will likely face conflicts. Some of these conflicts may even involve people or entities in power positions. It is becoming important that SMEs learn to negotiate and to consider alternatives like mediation. It is never the interest of business owners to drag out a dispute. On the contrary, you should choose the most cost effective and time saving option to put an end to the dispute.
Online Mediation Trumps All – High Chance Of Success And More
The recent covid-19 pandemic has accelarated virtually working methods, online mediation included. This process can be conducted using digital platforms like Zoom, Google Meet, Microsoft Teams and the various breakout room functions within each platform. This method of conducting the mediation allows parties to come together virtually from different time zones and from across the world. The outcome of this method is no less effective than a physical one.
Small business owners often tell us that they try to reach a settlement through informal discussions with the other party, before going to trial as a last resort. However, and as can be seen in the above diagram, mediation is both a cost-effective and principled manner (provided it is done in a formal way) in ending a dispute early, without sacrificing the commercial interests of all parties to the disputes.
You pay much less than you would for bringing the suit to trial. On a conservative estimate, it will cost you 5 x more to litigate than to mediate. Of course, this depends on the complexity of your case and the lawyers you chose to hire.
You spend much less time and effort on the dispute on the whole. This also means less stress of having to create a better case for trial by sorting out your documents and finding reliable witnesses and also waiting to find out whether the judge will rule in your favour. It also frees up time and head space for you to do what actually matters to you – including running and expanding your business.
You have the opportunity to create an agreement that addresses other issues and concerns and to create an outcome which the court may not have the power to order. It is more than just compromise or meeting each other in the middle. For example, the court cannot order someone to apologise to you for making defamatory remarks, but mediation gives you the opportunity to raise such concerns and find a way for the other party to recognise that your feelings have been hurt.
With more than 26 years of experience in dispute resolution, we dare say we have more than 90% success in resolving cases by mediation (whether physically or virtually conducted)
