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Difference between mediation & arbitration

Mediation proceedings are designed to bring parties to an agreement and the mediator does not have the power to impose any particular settlement whatsoever on them; whereas in arbitration proceedings the parties hand over control of their dispute to the arbitrator. Such authority invests the arbitrator with a heavy responsibility, compelling him to observe the same rules of conduct as apply to judicial proceedings.


The subject of mediation was first formalized in the Courts Law [Consolidated Version] 5244-1984, whose primary purpose was to enable litigants to select alternative methods of settling disputes between them, thus constituting possibilities of expediting dispute settlements on the one hand, while simultaneously relieving pressure on the courts on the other.

But what exactly are mediation proceedings? They are a procedure whereby a mediator meets with litigants with the aim of reaching an agreement as to the resolution of their conflict, inter alia by clarifying the matter in dispute, disclosing the necessary information pertaining to it and proposing possible options for its resolution.

The idea is that it is preferable to hold direct, effective and helpful talks between the parties, who are better placed to resolve the conflict between them than any external party such as a judge or arbitrator; this in effect is the path sought in mediation.

As distinct from a judge or an arbitrator, the mediator does not decide or impose any solution on the parties, but rather serves as a neutral and impartial aide to promote the interests of the participants in the process. His role is to help litigants to reach an agreed settlement of their dispute in mediation proceedings, through a process of free negotiation, while at the same time he has no authority to make a decision. Understanding, reconciliation and communication are key elements in drafting an effective and beneficial agreement between the litigants, whether short or long term, at the end of the mediation procedure.

In the course of the mediation the mediator holds several meetings, always in a pleasant atmosphere, with both parties at the table, and separate meetings with each party individually, as may be required. In the course of the mediation the parties undergo a process of change, moving from conflict and disagreement to consent. The ultimate outcome is the drafting of an agreement which is then approved and validated as a judgment by the court.

The mediator acts under the duty of privilege regarding everything that is said during mediation and is not permitted to testify in court in any matter pertaining to the dispute. Even if the mediator is an attorney, he may not give legal advice to the parties, who are referred to another attorney before signing the agreement.

Advantages of Mediation
  • Through mediation it is possible to reach an agreement in a short period of time, long before a court hearing would be completed.
  • The mediation procedure saves the considerable mental and emotional stress that is an integral part of court cases.
  • Mediation gives the parties an opportunity to state their position free of the formal rules that apply in court and in a calm and pleasant setting.
  • Mediation proceedings enable the parties to reach any agreement which is acceptable to them – provided neither party is discriminated against – and which complies with the social and legal rules defining the range of possible conflict resolutions.
  • The agreement obtained through mediation is validated as a judgment and is in effect a judgment whose content and text are determined by the parties themselves.
  • The parties have a greater commitment to an agreement that reflects the solution which they themselves have designed, thus avoiding disagreement, mental anguish and the need for further judicial proceedings after receiving the judgment;
  • In the event that no agreement is reached, participation in mediation proceedings does not prevent the parties from returning to litigation in court or seeking any other possible resolution of their conflict.
Until recently the subject of arbitration was formalized only in the Arbitration Law 5728-1968. Then, in light of the heavy load on the court system, the need for change arose and the Law was amended at the initiative of Attorney Dr.Israel Shimony, who is also Founder and Chairman of the Itro Institute. The new version was published as the Arbitration Law (Amendment no. 2), 5768-2008; it enables parties to reach mutual agreement on the option of appealing the arbitration award granted in their case through official appeal instances, with agreement on both the identity of the composition and the array of judges sitting at the first instance.

As aforesaid, arbitration proceedings are conducted by agreement, with the parties effectively agreeing to refer their dispute to arbitration. To this end, they sign an arbitration agreement specifying, inter alia, the identity of an arbitrator selected by mutual consent and also determining whether there will be an option to appeal the arbitral award that will be rendered in their case in the first instance and the identity and composition of the arbitrators in the appeal instance.

During the arbitration proceedings the arbitrator’s status is similar to that of a judge whose decision is binding on the parties. The Arbitration Law is designed to respond to the needs of the parties to a dispute and help them reach speedy, binding decisions, not through the court system.

It is common today for many corporations and firms in Israel to include an arbitration clause in agreements made and/or signed by them, pursuant to which, in the event that any dispute should arise between the parties to the agreement, they will refer to arbitration via the Itro Institute for Consent Arbitration, allowing the parties to choose by consent the identity of the arbitrator who will handle their case, from an extensive and impressive list of authorized arbitrators connected with the Institute, and to determine the composition that will hear their case in the appeal instance, in the event that they have agreed to have such option to appeal the eventual arbitration award.

Referral to arbitration is becoming increasingly widespread today in light of the recent Amendment No. 2 to the Arbitration Law, as initiated by Attorney Dr. Israel Shimony, Founder and Chairman of the Itro Institute. As aforesaid, the Amendment allayed the fear that previously prevailed among parties to disputes that a particular arbitrator may decide on an erroneous award in their case, without the possibility for them to appeal.

Arbitration has both advantages and disadvantages. The Law stipulates that any person may serve as an arbitrator. There is nothing to prevent the arbitrator from being a specialist in the area under arbitration. Such specialization can eliminate the need to summon some of the expert witnesses that are required in regular court proceedings. The arbitrator has the option of exploiting personal knowledge.

Advantages of Arbitration
The advantages of arbitration are the provision of an expeditious, legal judgment within three months, with an additional option for a further three months. This means that a decision will be rendered within six months from the date the arbitration document is signed, unless otherwise agreed by the parties. The preference of arbitration over mediation is that the former is final and binding.

The cost of arbitration should be lower than the cost of conducting regular court proceedings. In court proceedings the basic cost of the court fee at a rate of 2.5% of the amount of the claim must be taken into account. Furthermore, the extension of a regular court case and its dependence on laws of evidence result in substantial court costs. Another possible expense arises if and when one of the parties decides to appeal a judgment rendered against him. In arbitration proceedings the fee may be agreed in advance or it may be determined according to the arbitrator’s hourly rate or per meeting. The costs of expert witnesses can be saved in areas relevant to the arbitrator’s own field of expertise. It is important to know that even if a claim has already been filed in court, it can still be referred for arbitration, in which case the amount already paid for court fees is refunded.

It is best if the arbitrator is not only familiar with the subject under dispute, but is also a legal professional, since certain issues may arise in the course of arbitration, such as claims of limitation, an increase in the amount of the claim, an intermediate award, temporary relief, permitted rates of interest and so forth. An arbitrator who is not a jurist may apply to the court for clarification (consultative case). However, additional payment will then be required for the attorney who will represent the arbitrator in such an application.

An arbitration agreement duly executed may not be annulled by either of the parties; it must be made in writing and signed by both parties. It is recommended that all differences of opinion between the parties be included in the arbitration agreement, so as to come within the jurisdiction of the arbitrator’s award, thus avoiding future disputes about any additional conflicts that may arise in the course of arbitration, including the arbitrator`s decision in the matter of the validity of the arbitration agreement itself.

The arbitrator has the same authority as a judge to summon and question witnesses and award costs. Arbitration proceedings must be recorded in written minutes and/or on tape. The proceedings carry a duty of proper disclosure, to which end all arbitration sessions and meetings are held in the presence of all parties. Applications for arbitration from any of the parties must be submitted only in writing.

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