Alternative dispute resolution (or ADR) has become an increasingly common way to solve differences between two parties. Given the costs and inconvenience of litigation, it’s easy to see why—ADR is often much faster and far less expensive than going to court.
The two main types of ADR are arbitration and mediation. While these two terms are often used in the same sentence, they are actually very distinct methods of dispute resolution.
Difference Between Mediation and Arbitration
Arbitration and mediation both occur outside of a formal court setting, and they thereby avoid the costs and processes involved in formal litigation. However, they achieve their end results by different means:
- Arbitration involves the use of third-party arbitrators who act as judges. The two parties explain their positions, and the arbitrator(s) determine what the outcome should be.
- Mediation, on the other hand, involves a third party mediator. The mediator does not determine what the results should be. Instead, he or she facilitates a discussion between the two parties and helps them come to their own solution.
Often, arbitration is binding while mediation is not, but this is more a general trend than an actual rule. Either one may be binding or nonbinding, but in the case of binding arbitration, it essentially acts as a replacement for a court trial.
To determine whether to use arbitration or mediation, it’s important to take into account the nature of each process.
When to Use Arbitration
Arbitration is best used when you need a third party to judge your position and that of the other party. This may be the case when you have attempted negotiation but have found that reasoned discussion on the issue is virtually impossible.
While it does cost less than litigation, the arbitration will often function more or less the same way—you may have a long discovery process, you’ll probably have a win-lose scenario rather than a compromise, and the end result will be determined by a third party based on facts, evidence, and the law. However, the process is kept private, and it is still far less taxing than taking a dispute to court.
When to Use Mediation
Mediation is less formal than arbitration, and the focus is more on facilitating a mutually beneficial discussion than on using facts and evidence to determine who is right. As such, it’s better for instances where the two parties are able to negotiate a solution to the issue and where they are each willing to share needed information with one another.
Since mediation is focused largely on the needs of the two parties and less on evidence or the law, there is a higher chance that a working relationship between the two will be preserved, so it may be better than arbitration in that case.
When to Use Neither
At times, it is necessary to create a binding and enforceable outcome. If the dispute represents a significant legal issue, then ADR may not be sufficient to resolve the problem. In these cases, litigation may be better than either arbitration or mediation, particularly if you’re confident that you’ll win.
When determining how to resolve a dispute with another business, organization, or party, an attorney is an invaluable resource. Hart David Carson LLP can help you decide on the best course of action to take and represent you throughout the process.