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Alternative Dispute Resolution: Mediation vs. Arbitration

As our society becomes increasingly litigious, individuals and entities are seeking to avoid the costly, public, and time intensive process of a law suit. As a result, interest in mediation and arbitration has also increased. So what is the difference between the two? This post will give an overview of the similarities and differences between mediation and arbitration.

Alternative Dispute Resolution

Mediation and arbitration both utilize a neutral third party to resolve a dispute either without litigation or in conjunction with it. Both may or may not be binding, however typically mediation is non-binding, while arbitration is binding. There are several types of mediation and arbitration, but this post will focus on the basics:

Mediation

In mediation, a single neutral mediator is chosen to facilitate discussion between the parties, so they can reach an agreement on how to resolve the dispute. The mediator does not pass judgement or make decisions, though they may suggest creative solutions. While mediators in this area are often former judges, they generally do not give legal advice or opinions regarding either party’s position or the resolution.

Mediation is a way for disputing parties to openly and confidentially work through their problems and reach a mutually agreeable solution. It is typically used when those involved have a continuing relationship, are willing to negotiate, and don’t want to forfeit their decision making power to a third party. This is why businesses often consider mediation to resolve issues. They may choose to draft and sign a binding agreement following the mediation, but if an agreement is not reached, litigation remains an option.

Arbitration

Arbitration is more like a simplified litigation. Each side presents their case- including evidence, arguments, and witnesses – to a panel of arbitrators, though a single arbitrator may be used. Usually, one arbitrator is selected by each party, and a third is selected by the two chosen arbitrators. The panel then decides the case and the appropriate award. If the parties have agreed to a binding arbitration, the award is enforceable in court and has limited appeal options.

Arbitration can be faster and cheaper than a court proceeding, and the dispute stays out of the public eye, which is why many companies put arbitration agreement provisions in their contracts. However, arbitration requires both parties to forfeit control of the outcome of the dispute.