Arbitration and Mediation - What's the Difference?
07/16/08
Arbitration and mediation are both methods of resolving disputes outside of court. Both methods give the parties an opportunity to settle their conflict without the time and expense of traditional lawsuits. There are, however, some important differences to consider when selecting arbitration or mediation as an alternative form of dispute resolution.
In arbitration, a neutral third party, the arbitrator, is chosen to hear the parties’ dispute and make a final decision. In essence, the arbitrator acts as the judge and jury for the parties. In mediation, the mediator is also a neutral third party, but unlike arbitration, the mediator is not empowered to make a decision; instead, the mediator works with the parties in an effort to negotiate a mutually-agreed resolution of their dispute.
Both arbitration and mediation can be initiated by written agreement between the parties. Today, many commercial and consumer contracts include a mandatory arbitration clause, which requires the parties to arbitrate their disputes rather than going to court. Many of these clauses designate a particular arbitration forum to be utilized by the parties, such as the American Arbitration Association. There also are federal and state statutes that govern arbitration agreements and proceedings. When an arbitrator makes a final decision, known as the award, it is legally binding and can only be appealed to a court in very limited circumstances.
|
Factors |
Arbitration |
Mediation |
|
Neutral Third Party |
X |
X |
|
Reduces Litigation Cost* |
X |
X |
|
Final Decision by Neutral Party |
X |
|
|
Legally Binding Decision |
X |
|
|
Negotiates a Mutually Agreed Resolution |
X | |
|
Initiated by Written Agreement |
X |
X |
|
Any Party Can Terminate Process |
X |
As with arbitration, parties may enter into mediation by written agreement. In addition, the rules of many federal and state courts require parties in a lawsuit to participate in mediation before their case is tried. Unlike arbitration, however, parties in mediation are not required to participate until a final resolution of the dispute is reached—any party can terminate the mediation process at any time if it appears the dispute cannot be resolved by mutual agreement.
Both arbitration and mediation are informal, confidential proceedings in which a resolution does not necessarily become a matter of public record. Before agreeing to participate in either an arbitration or mediation, make sure you understand not only the differences between the two, but also the rules and procedures that apply to your choice.
If you would like to learn more about arbitration and mediation, Swanson Midgley attorney John Miller has many years of experience with all forms of alternative dispute resolution, including arbitration and mediation, and he would welcome the chance to speak with you.
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