Mediation vs. Arbitration – Know the Difference
Litigation can be a long, frustrating and expensive experience. Given the choice, most of us prefer to avoid litigation if at all possible. The two most widely used forms of Alternative Dispute Resolution (ADR) to avoid litigation are mediation and arbitration. Each process is distinctive. If you are considering using either of these alternatives to traditional litigation, knowing their similarities and differences is essential to choosing the right process for your specific situation.
Mediation is a confidential legal process that uses a neutral third party to act as a facilitator to the agreement, but not a decision-maker. It is used to avoid settling a dispute in court. The mediation process is informal and does not follow the rigid rules of evidence or procedure used in litigation. The parties to the dispute are in control. Ultimately, success depends upon the parties’ ability to reach an agreement. The mediator stimulates discussion between the disputing parties to help the negotiation process and move the dispute toward a resolution. Mediation is a non-binding process. It does not restrict the ability to pursue the dispute further unless the parties reach an agreement and choose to be bound by the agreement’s terms.
Arbitration is also a confidential legal process used to avoid settling a dispute in court. However, the neutral third party is appointed to review the case and make a final decision in favor of one of the parties. The arbitrator renders a decision that is generally binding and cannot be appealed. The process is more formal than mediation, although it is still usually less formal than litigation.
How Mediation and Arbitration are Alike
Arbitration offers many of the same benefits as mediation. Both allow disputing parties to settle their conflicts outside of the traditional court system. Mediation and arbitration are also similar in that they both:
- Can resolve disputes quickly and usually less expensively that litigation.
- Are confidential proceedings in which the resolution doesn’t become a matter of public record.
- Use a neutral third party (arbitrator or mediator) to oversee the proceedings.
- May result in legally enforceable resolutions.
- Require voluntary participation from the disputing parties (unless a mediation or arbitration contract has been previously signed).
Differences between Mediation and Arbitration
One of the most important differences between mediation and arbitration is that an arbitrator makes a final decision on a case, while a mediator does not. During the arbitration proceeding, an arbitrator listens to and considers all relevant information, then decides which party should win. Essentially, the arbitrator acts as the judge and jury. In contrast, a mediator doesn’t impose a final resolution on the disputing parties. The mediator acts as a middleman who facilitates discussions for possible settlements or resolutions and encourages the disputing parties to arrive at their own decision.
When an arbitrator makes a final decision (an Award), it is legally binding. Appeals are accepted only under special circumstances. In contrast, mediation settlements are never legally binding unless both parties specifically request binding mediation. In most cases, if disputing parties sign a mediation clause, they are required to participate in mediation, but the settlements or decisions remain legally non-binding. If the disputing parties wish to make their mediation agreement binding, the judge must sign the mediation agreement settlement.
Another difference between mediation and arbitration is in the ability to withdraw from the process. While a mediation agreement can require persons to participate initially, neither party is required to complete the process or find resolution because mediation agreements are not legally binding. Conversely, parties involved in arbitration can withdraw only before a final decision is made and only if no arbitration clause has been signed. Arbitration clauses require that all parties use arbitration to make a decision according to the stated stipulations.
Arbitration is generally less flexible and more costly than mediation. There is a tendency in arbitration to split the pot, which can leave the parties involved feeling dissatisfied.
Alternative Dispute Resolution options can achieve efficient and effective results. However, because their inherent differences can affect the outcome of a dispute, choosing the right form of ADR for your situation is key to getting the most favorable outcome.
If you need additional information, consult your local legal counsel. Umbaugh also has provided support to clients in certain dispute resolutions.
If you have questions or want more information about ADR options, please contact us at firstname.lastname@example.org.
Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at email@example.com.