Legal disputes in the real estate market are getting on the nerves of the people as no one wants to face those months and years of court proceedings. Whether it is residential space or commercial space, legal considerations for construction disagreements are inevitable. Sometimes, it’s just to fraud the money; sometimes, it’s authentic. So what can be the relevant construction dispute resolution methods to avoid long and long court proceedings still getting the resolution?
This brings into the picture alternative dispute resolution (ADR) as a way to resolve disputes outside of the court, and here starts the debate about which of the two popular solutions, mediation vs arbitration, should be chosen to address the dispute.
Both Mediation and Arbitration are perfect ways to resolve legal disputes in construction outside the court in a more cost-effective way. Which one to choose to sort your legal dispute? Continue reading the blog, as here we will put together the difference between Mediation and Arbitration to help you make an ideal choice.
What is Mediation in a Construction Dispute?
Mediation in the construction industry is one of the effective ways to resolve disputes outside the court. During mediation, parties negotiate to resolve their differences. Mediators are legal professionals involved in the proceedings, identifying key issues in disputes and determining options and alternatives for resolution. Contractual clauses may require mediation or be voluntary, ordered by the court, or mandated by the dispute resolution clause.
Mediators serve as third parties who facilitate discussions between disputing parties. By asking questions, they help identify the real issues in dispute and develop options for resolution. It is common for the parties to sit in separate rooms in most mediation, and the mediator will speak with one party at a time, switching between them throughout.
Key characteristics of mediation in construction:
- Neutral Third Party
- Empowerment
- Confidentiality
- Intimate and Flexible
What is Arbitration in a Construction Dispute?
Arbitration is an Alternative dispute resolution construction that involves an independent adjudicator who makes a binding decision after considering both parties’ evidence. Arbitration has many similarities with litigation, but arbitration occurs outside the courtroom. An arbitration clause usually arises from a conflict resolution clause in a contract. Additionally, it can happen when the parties voluntarily agree to arbitrate (for instance, to keep the dispute private).
Arbitrators are chosen by agreement between the parties. If the parties cannot agree on a specific arbitrator, an independent person or body will often be appointed as an arbitrator. A formal and structured process distinguishes arbitration from mediation.
Key characteristics of arbitration in construction:
- Neutral Third Party
- Formal Procedure
- Binding or Non-Binding
- Efficiency
Along with this, it’s crucial to know when to hire a construction lawyer to get legal advice.
Mediation vs Arbitration in Construction Dispute: Comparison Table
| Basis | Mediation | Arbitration |
| Decision Maker | It is up to the parties to make their own decisions and retain control. | An arbitrator renders a final decision, which may be binding or non-binding. |
| Legally Binding Nature | Parties can only agree to a binding mediation agreement if they like it and then indicate it is legally valid. | Due to the lack of judicial scrutiny, arbitration decisions are usually final and, unless specifically excluded, are as valid as court judgments. |
| Public or Private | Mediation sessions are conducted in private under strict confidentiality conditions. | Arbitration settlements are based on agreements between the parties or on prior laws, whether privately or publicly. |
| Appeal Process | Mediation usually does not have an appeal process since the outcome is agreed upon by the parties involved. | Depending on the arbitration rules and laws that apply, some limited appeal options can be available in arbitration. |
| Role of the Third Party | The mediator facilitates communication, filters problems, and generates viable solutions but does not force decisions on parties. | Arbitrators function as decision-makers when they evaluate the evidence and make a binding decision. |
| Nature of Procedure | Mediation covers a similar concept guided by a third party but differs from arbitration in that it is more collaborative. The vision behind this is to reach a conclusion and address the disagreement. | Arbitration involves alternative dispute resolution, in which lawyers or legal professionals serve as arbitrators. Parties put together evidence for the arbitrator, with the goal of getting the third party to resolve the dispute or disagreement. |
| Principles for the Procedure | Mediation also requires agreement from the parties and collaboration between them. When one party refuses to participate, it is difficult to enforce the agreement. A business agreement may mandate mediation if certain conditions are met. | Arbitration requires the parties to agree to arbitrate between themselves, known as an arbitration agreement. An arbitration clause, or arbitration agreement, is usually a relatively short clause included in a business agreement. Even when parties sign written agreements before a dispute arises, they can also agree to resolve it through arbitration. In addition, to avoid any dispute, it’s crucial to understand the contractual agreements in construction. |
| Confidentiality | Mediation also requires agreement from the parties and collaboration between them. When one party refuses to participate, it is difficult to enforce the agreement. A business agreement may mandate mediation if certain conditions are met. | Arbitration requires the parties to agree to arbitrate between themselves, known as an arbitration agreement. An arbitration clause, or arbitration agreement, is usually a relatively short clause included in a business agreement. Even when parties sign written agreements before a dispute arises, they can also agree to resolve it through arbitration. |
| Estimated Cost and Duration to Get the Outcome | Mediation is a cost-effective way to address construction industry disputes and gives you an outcome quicker than arbitration. It is all because of the informal nature and unique approach to fast-pacing the case, which has made it efficient to resolve it quickly within days or weeks. Mediation is an ideal solution for all parties looking for a cost-effective yet quick resolution. | In contrast, arbitration is an expensive and time-consuming process. If the case is complex, it will take months or even years to reach a conclusion. Arbitration also involves higher fees because of administrative costs and the arbitrators’ costs. |
| Legal Framework Support | Mediation is less formal than litigation and less governed by procedural rules. Therefore, it is more adaptable to a variety of legal contexts. There are no significant complications associated with its use across different jurisdictions. | Whereas arbitration has a specific legal framework that governs it. The Arbitration and Conciliation Act of 1996 provides a complete legal framework for arbitration in India. Arbitration judgments are recognized and enforceable in multiple jurisdictions, making them appealing for resolving legal conflicts. |
Conclusion
Individuals hit by legal complications in the construction market looking to avoid courtroom proceedings turn to mediation and arbitration to resolve their legal disputes for residential and commercial properties outside the court. Each of the alternative dispute resolution methods is best in its own respect, so it depends on you and the case complexity to choose from the best.
If you are afraid of all the legal complications while constructing a space in India, Brick & Bolt is the top construction company that adheres to all the legal complications while constructing the property. We have a team of experts always in the loop to check the legal concerns of every property to ensure that you do not have to face any construction disputes. Contact us today to construct your dream space without compromising on any legal concerns.
Also Read: Legal Implications: When to Use Judicial Stamp Papers vs. Non-Judicial Stamp Papers