Mediation vs. Arbitration

While mediation and arbitration are both forms of alternative dispute resolution (ADR), these two proceedings do have some key differences. If you are considering using either of these alternatives to traditional litigation, knowing their similarities and differences can be helpful in choosing the right process for your specific situation.

Mediation is a process used to avoid settling a dispute in court. During mediation, a third, unbiased party (the mediator) stimulates discussion between the disputing parties to help the negotiation process and move the dispute towards a resolution.

Arbitration is also legal process used to avoid settling a dispute in court. In this process, a third, unbiased party (the arbitrator) is appointed to review the case and make a final decision in favor of one of the parties. Essentially, the arbitrator acts as the judge and jury, whereas the mediator is more of a facilitator who does not impose a final resolution on the disputing parties.

Mediation and Arbitration Similarities

As forms of ADR, both mediation and arbitration allow disputing parties to settle their conflicts outside of the traditional court system, which usually involves lengthy, costly proceedings. Other similarities between mediation and arbitration are that they both:
  • are confidential proceedings in which any resolution made does not become a matter of public record
  • are informal proceedings with far less technicalities than the traditional court system
  • invoke a third, neutral party (either the mediator or arbitrator) 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).
Some examples of cases that can be resolved with ADR include:
  • business disputes, such as a claim of unfair or illegal treatment in the workplace
  • consumer disputes, such as a faulty product conflicts
  • family disputes, such as child custody
  • international disputes, such as diplomatic conflicts.
While mediation or arbitration may be initiated once a dispute arises, in some cases, these processes begin because they have been stipulated in a larger contract as the method of resolving disputes. Signing a contract with an arbitration or mediation clause agreement indicates that you agree to participate in the stated process should a dispute arise.

Mediation and Arbitration Differences

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 an arbitration proceeding, an arbitrator listens to and considers all relevant information, then deciding which party should win. The winning vote is called an Award.

On the other hand, a mediator discusses possible settlements and encourages the disputing parties to arrive at a decision on their own. In a way, the mediator acts as a sort of middleman that facilitates discussions to get the individual parties to agree on a resolution. When an arbitrator makes a final decision, it is legally binding. Appeals are only accepted 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 none of the settlements or decisions reached is legally binding.

If the disputing parties wish to make their agreements binding, they can arrange an "agreement settlement." An agreement settlement is a written contract stating the terms of the agreements. In order for it to be legally binding, a 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, because mediation agreements are not legally binding, neither party is required to neither complete the process nor find a resolution if (s)he does not want to.

Conversely, parties involved in arbitration can only withdraw 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.

Mediation and arbitration can both be effective ways of settling disputes outside of court. 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.
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