To many, arbitration and mediation are synonymous. Both involved the resolution of a dispute with the assistance of a third party. However, there are major legal differences between these tools of alternative dispute resolution. It is important to know those differences before attempting to mediate or arbitrate a dispute.
Mediation is where the parties agree to negotiate with the help of a neutral third party, known as a mediator. The mediator can be chosen by the mutual consent of the parties. While there is usually only a single mediator, on rare occasion a panel of mediators may be used.
Mediation is non-binding, which means the parties reserve the right to proceed to further ligation or trial if mediation fails.
Mediation can be advantageous because:
- It can save the parties money.
- It can save the parties time.
- A mediator can help the parties see case issues more clearly.
- The mediator can offer his or her impartial opinion of the flaws in each parties’ case.
- A knowledgeable and experienced mediator can often provide his or her opinion on the likelihood of success at trial for a particular party.
- Each party can discuss privately and confidentially with the mediator their private thoughts regarding settlement, this can allow the mediator to identify a possible solution.
Mediation can be disadvantageous because:
- If the matter does not settle, the parties may be forced to go to trial anyway.
- The parties may be too far apart or too disagreeable to settle.
- The mediator may not have a good grasp of the facts of the case in order to help bring the parties together.
- The parties may not be negotiating in good faith with each other.
- Several mediation sessions may be required before a matter is able to settle.
- The dispute between the parties may be time sensitive and cannot wait for the parties to reach an agreement.
If mediation is successful and the parties reach an agreement, that agreement will be reduced to writing (a Release and Settlement Agreement) for the parties to sign. This can be done by the attorneys for each party. If a lawsuit has already been commenced, it will also include a Stipulation of Discontinuance of the lawsuit which must be filed with the Court.
Like mediation, parties who wish to arbitrate seek out a neutral third party, an arbitrator, to assist with resolving the dispute. The arbitrator can be chosen through the mutual consent of the parties. The arbitrator is typically an individual knowledgeable and experienced in the law. Often times other attorneys or former judges are asked to act as an arbitrator.
However, unlike mediation, an arbitrator will render a final decision that is almost always binding on the parties. An arbitration proceeding could be considered a mini-trial where each side presents their case to the arbitrator, who will made a final decision. There is no back and forth negotiation in an arbitration proceeding like there is in a mediation.
Arbitration can be advantageous because:
- It can save time.
- It can save money.
- The proceedings are private unlike trial.
- The parties must obey the arbitrator’s decision.
- The parties avoid going to trial.
Arbitration can be disadvantageous because:
- Absent corruption, fraud, or misconduct, an arbitrator’s decision generally cannot be appealed.
- Arbitrators are not bound by the substantive law or rules of evidence, they may do justice as they see fit.
- If one party has an economic advantage over the other party, that party will not be able to leverage that advantage against the other party through litigation.
Arbitration and Mediation can be useful alternative dispute resolution tools under the right circumstances. They can save both time and money for the parties when done correctly.
Before engaging in arbitration and mediation, it is recommended that you consult with a knowledgeable attorney experienced in both forms of alternative dispute resolution. Our experienced attorneys have served both as arbitrators and mediators, as well as attorneys on behalf of clients.
For more information on arbitration and mediation, please contact our office for a free consultation with an attorney.