Mediation vs Arbitration

Mediation and Arbitration are generally contractually agreed upon substitutes for resolving disputes as opposed to resorting to a court to resolve it. The purpose and goals of Mediation and Arbitration, however, are quite different and often misunderstood.

The purpose of Mediation is to have the parties sit down with a neutral third party who tries to facilitate a monetary or other settlement to the dispute. Neither party has a legal obligation to settle the dispute, and any statements made during a Mediation are not admissible evidence in the event no settlement is reached. Mediation can be a highly efficient, cost effective tool. It can conclude quickly or it can take several hours as the mediator conducts multiple rounds of shuttle diplomacy between the parties. My personal experience is that after many hours the parties feel personally invested in the process and neither wishes to leave without settling the dispute. It is important to remember, however, that because the mediator’s job is to get a settlement, regardless of its terms, it is up to you to determine if you can live with the settlement terms. In the event the Mediation fails and an Arbitration provision is not contained in the contract, you can enforce your rights in a court of law.

Binding Arbitration provisions, on the other hand, are a substitute for the formal process of a court. Binding Arbitration is typically conducted in front of one or three arbitrators and the Arbitration is much like a mini trial with rules of evidence. Arbitration typically proceeds somewhat faster than a case in court, and typically at a somewhat lower cost in attorney time and expense. The result of the Arbitration is final and the parties can rarely successfully appeal an arbitrators’ decision even if it appears to be completely unreasonable or unfair.

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