In modern business, time and confidentiality are crucial. When classical mediation fails to achieve results, and court proceedings are too prolonged, “Med-Arb” appears as the best alternative. This is a synthesis of mediation and arbitration, which combines the advantages of both institutions within one unified, continuous system.
The legislation of Georgia – in particular the Law on Arbitration and the Law on Mediation – does not prohibit the use of hybrid models. Moreover, the rules of Georgian arbitration institutions often directly indicate the arbitrator’s authority to propose, at any stage, that the parties settle the dispute amicably.
In practice, if the parties include a “Med-Arb clause” in the contract, it means they agree in advance on the sequence of the process. Under Georgian rules, an agreement reached at the mediation stage may be approved by the court or formalized as an arbitral award on agreed terms, which also grants it international recognition.
How does “Med-Arb” function in Georgia?
The process is divided into two main sequential phases, led by the same neutral third person:
During the mediation stage, the parties together with the mediator try to reach a compromise. The process is voluntary and focused on aligning interests. If successful, a legally binding settlement agreement is drafted.
At the arbitration stage, if negotiations fail, the arbitrator becomes involved. They assess the evidence and issue a final, binding arbitral decision (award) only on the issues on which the parties could not reach agreement.
When is this model used in business disputes?
“Med-Arb” is most effective in commercial relationship scenarios where time is critical and maintaining relationships is a priority:
Long-term partnerships – when companies have multi-year strategic relations and neither side wants to completely terminate the relationship due to a dispute in court.
Complex, multi-component contracts (construction and IT sectors) – where disputes may concern dozens of clauses. Parties may settle 80% through mediation, while the most fundamental 20% is referred to arbitration.
Time-restricted projects – where every lost day means a financial obligation and the business needs assurance that the process will end with a final decision within a specific, short timeframe.
What advantages does it have?
Due to the overload of Georgian common courts, business disputes often last up to 2-3 years. “Med-Arb” allows a final, enforceable verdict to be reached in just 3-6 months.
Since the same specialist handles the case, parties do not need to pay new fees or re-explain the facts and evidence of the case; the arbitrator already knows the case circumstances in detail.
Confidentiality – in Georgia’s small and closely connected business market, reputation is irreplaceable capital. Unlike public courts, this process is closed and fully protects companies from media or competitive risks.
International enforcement – a mediation settlement that is later transformed into an arbitral award is easily enforceable both domestically and internationally.
Conclusion
“Med-Arb” is a hybrid of mediation and arbitration that combines an attempt at consensual resolution with a final binding decision. It ensures a fast, confidential, and cost-effective dispute resolution. Despite ethical risks, the model is particularly effective in business disputes, provided that its use is clearly defined in advance in the contract.
