The Expert Podcast

The question that comes up very frequently is: What is the difference between arbitration and mediation? If you have a dispute with somebody—whether it's a court case or a contract case—many times the subject of mediation or arbitration will come up. It’s important to know the differences between the two.

First of all, both methods are alternative ways of resolving disputes, collectively known as ADR (Alternative Dispute Resolution). These methods serve as alternatives to the legal process, where you go to court, file a lawsuit, or undergo other legal proceedings. ADR methods like mediation and arbitration have several advantages. For instance, you avoid legal fees and the lengthy court process, which can take months or even years in some cases. Additionally, you retain some control over the process. In contrast, the court process essentially surrenders the outcome to the whims of the court—whether it’s a judge or a jury.

Both mediation and arbitration are considered plaintiff-controlled processes, but this is where the differences emerge. Mediation involves a third party who assists in achieving a voluntary solution. It is an alternative conflict resolution process that provides several advantages over going to court. The parties can engage in mediation with or without an attorney. A third-party mediator facilitates a conversation between them, helping both sides discuss and clarify their interests and concerns.

Many times, the interests and potential solutions already have significant overlap, and not much dispute resolution is needed. In mediation, the parties retain control over the process, including deciding the format, timing, location, and attendance. It’s also a less expensive alternative to court and can occur at any stage during the conflict or dispute. Mediation is confidential and less intimidating than a courtroom environment. Moreover, solutions in mediation can be more creative and tailored to both parties, unlike court-imposed solutions that are often limited by specific requirements.

In mediation, the mediator doesn’t impose a solution. Their role is to facilitate an agreement between the parties. Mediation is usually not binding unless both parties voluntarily agree to the mediator's suggestions and sign an agreement. Once signed, the agreement becomes binding. However, if mediation doesn’t produce a desirable result, no harm is done—you’re back to where you started. You can then explore another ADR method, such as arbitration, or proceed to court.

Arbitration, on the other hand, shares some similarities with mediation but has distinct differences. Like mediation, it involves a neutral third party, known as an arbitrator, who is unrelated to either party and does not take sides. However, unlike mediation, the arbitrator acts as a private-sector judge. They listen to evidence from both parties and make a ruling to resolve the conflict.

In arbitration, the arbitrator is in control of the process. They dictate when, where, and how the proceedings will be conducted. While arbitration is typically more flexible and less formal than a court case, it differs significantly in that the arbitrator’s ruling is final and usually binding on both parties. Although appeals or court reviews might be possible, they are often limited by contract or legal constraints.

The key differences between mediation and arbitration can be summarized as follows: Mediation is voluntary and non-binding, with the parties retaining control over the process. In contrast, arbitration is binding, and the arbitrator controls the process and outcome.

Both mediation and arbitration are valuable tools for resolving disputes. Anything you can do to avoid going to court is generally beneficial. Lawyers often advise their clients to stay out of court whenever possible. Once you enter the courtroom, the outcome is entirely out of your hands, and you lose control over your destiny.

Neutral third parties, whether mediators or arbitrators, play a crucial role. They help remove emotional baggage and biases from the equation. When negotiating directly or even through attorneys, emotions and past issues can complicate matters. A neutral third party can provide clarity and help achieve better outcomes in either mediation or arbitration.