Mediation vs Arbitration Clause
Last updated: February 2025
Quick Comparison
| Aspect | Mediation Clause | Arbitration Clause |
|---|---|---|
| Binding nature | Non-binding unless settlement is reached | Binding decision by the arbitrator |
| Decision maker | Parties decide; mediator only facilitates | Arbitrator decides; parties must accept the award |
| Cost | Typically £5,000-£20,000 for a day of mediation | Can be £50,000-£500,000+ depending on complexity |
| Enforcement | Settlement agreement enforceable as a contract | Award enforceable like a court judgment; international enforcement under New York Convention |
| Speed | Usually resolved in a single day | Months to years depending on complexity |
What Is a Mediation Clause?
A contractual provision requiring parties to attempt to resolve disputes through a neutral mediator who facilitates negotiation but cannot impose a binding decision.
Key Features
- • Mediator facilitates discussion but has no decision-making power
- • Non-binding unless parties reach a written settlement
- • Confidential process
- • Typically completed in 1-2 days; significantly cheaper than litigation
Best For
- • Preserving business relationships while resolving disputes
- • Commercial disputes where a negotiated outcome is preferred
- • Early-stage disputes before positions become entrenched
What Is a Arbitration Clause?
A contractual provision requiring disputes to be resolved by one or more private arbitrators whose decision is binding on the parties.
Key Features
- • Arbitrator's decision (award) is final and binding
- • Private and confidential proceedings
- • Parties can choose specialist arbitrators
- • Awards enforceable internationally under the New York Convention
Best For
- • International contracts needing cross-border enforcement
- • Specialist disputes requiring technical expertise
- • Situations where confidentiality is essential
When to Use a Mediation Clause
Include a mediation clause as a first step in your dispute resolution process. It preserves relationships, is cost-effective, and resolves the majority of commercial disputes. Courts also expect parties to have considered mediation.
When to Use a Arbitration Clause
Include an arbitration clause for international contracts where enforcement in foreign courts is needed, for disputes requiring specialist knowledge, or where confidentiality is paramount.
Which Does Your Business Need?
Best practice is to include both in a tiered dispute resolution clause: mediation first, then arbitration or litigation if mediation fails. This gives you the best chance of a quick, cost-effective resolution while retaining a binding backstop.
FAQ
Is a mediation clause enforceable in England and Wales?
Can I appeal an arbitration award?
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This is guidance for UK businesses, not legal advice. Consult a solicitor for complex matters.
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