Mediation vs. Arbitration for Contracting Disputes in Bahrain
In Bahrain’s contracting industry, disputes can arise over delays, payments, variations, defects, or scope changes. While litigation in court is an option, it is often time-consuming and public making alternative dispute resolution (ADR) methods like mediation and arbitration more attractive.
Both mediation and arbitration aim to resolve disputes without prolonged court proceedings, but they differ in process, cost, confidentiality, and enforceability. This blog explains the key differences, advantages, and when each method may be most suitable for contracting disputes in Bahrain.
What Is Mediation?
Mediation is a voluntary, confidential process in which a neutral third party (the mediator) facilitates negotiations between the parties to help them reach a mutually acceptable agreement.
Key Features
- Non-binding — parties are not forced to accept a solution.
- Informal and flexible procedure.
- Preserves business relationships by encouraging cooperation.
- Often quicker and less expensive than arbitration or litigation.
When to Use Mediation
- When both parties want to preserve an ongoing relationship.
- For disputes involving misunderstandings or contract interpretation.
- When creative, non-legal solutions are possible.
What Is Arbitration?
Arbitration is a more formal process where an independent arbitrator (or panel) hears evidence and arguments before issuing a binding decision known as an award.
Key Features
- Binding and enforceable under Bahraini law and international conventions.
- Similar to court proceedings but typically faster and more flexible.
- Confidential, unlike court judgments which are public.
- Often used for high-value or complex technical disputes.
When to Use Arbitration
- When a binding, enforceable decision is required.
- For large-scale, technical disputes in construction and contracting.
- When parties want confidentiality but still need a decisive ruling.
Legal Framework in Bahrain
- Mediation: Can be voluntary or court-referred. Settlements reached in mediation can be formalized into binding agreements.
- Arbitration: Governed by Bahrain’s Law No. 9 of 2015 Promulgating the Arbitration Law, based on the UNCITRAL Model Law, and supported by the Bahrain Chamber for Dispute Resolution (BCDR).
- Arbitration awards are recognized and enforceable under the New York Convention, to which Bahrain is a signatory.
Risks of Choosing the Wrong Method
- Using mediation for entrenched disputes where parties have no intention to compromise can waste time and money.
- Choosing arbitration for minor disputes may be unnecessarily expensive and complex.
- Poorly drafted ADR clauses in contracts can lead to jurisdictional challenges.
Example:
A contractor and employer in Bahrain disagreed over payment for additional works. The contract contained both mediation and arbitration clauses.
They began with mediation, but after two sessions, no agreement was reached. The dispute proceeded to arbitration, where an arbitrator awarded payment to the contractor.
A lawyer reviewing the case noted that mediation was useful for narrowing the issues and avoiding a complete breakdown in communication, even though arbitration was ultimately required for a binding decision.
Best Practices
For Employers:
- Include clear ADR clauses specifying when mediation or arbitration applies.
- Use mediation early to preserve relationships and avoid escalation.
- Choose arbitration for complex, high-value disputes where a binding decision is essential.
For Contractors:
- Prepare thoroughly for mediation with clear objectives and supporting evidence.
- Ensure arbitration clauses specify the governing law, seat, and rules.
- Keep ADR records confidential to protect future legal positions.