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, and it's important to know the differences between the two. First of all, both methods are an alternative method of resolving a dispute, known as ADR (Alternative Dispute Resolution), and they serve as alternatives to the legal process, where you go to court, have a lawsuit, or other legal proceedings. The alternative methods, such as mediation and arbitration, have advantages because you're not going to have legal fees, and you don't have to go through the whole court process, which can take months or even years in some cases. You also have some control over the process. With the court process, you're basically surrendering your outcome to the whims of the court, whether it's a judge or a jury. In arbitration and mediation, you retain some control over the process. In fact, both of them are considered to be plaintiff-controlled processes.

Now, here’s where the differences come in. Mediation is a form of having a third party assist with a voluntary solution. It's an alternative process for conflict resolution, and it provides advantages over going to court. The parties can do it with or without an attorney and have a third-party mediator to help facilitate a conversation between them, helping both sides discuss and clarify their interests and concerns. Many times, the interests and solutions already have a lot of overlap, so not as much dispute resolution is needed. The parties retain control over that process, including the format, when, where, how, who can attend, and how to resolve the dispute. It's a lot less expensive than going to court, and it can occur anytime during the conflict or dispute. Mediation is confidential, and it’s a less threatening environment than going to court. The solutions can be more creative, where courts may have certain requirements and can only do certain things, while you can custom-tailor the solution in mediation to both parties' or all parties' needs, something that a court might not be able to do. In mediation, the mediator doesn't tell you what you have to do. It’s usually not binding, it's a suggestion, and they try to facilitate results where both parties voluntarily agree to what the mediator suggests or comes up with, or in many cases, they don't suggest or come up with anything—they show the parties where they already have an answer. Once the agreement that the mediation process produces is signed, it’s binding. So, both parties still have control over their future during the mediation process.

Now, if the mediation doesn't produce a desirable result for both parties, there’s no harm, no foul. You can start back where you were, look at another form of alternative dispute resolution like arbitration, which we’ll talk about now, or you can go to court.

Arbitration has some similarities. It's a third party that's neutral—the third party isn't related to either one of the conflicted entities, and they're not taking sides. The arbitrator listens to the evidence from both parties and makes a ruling to determine the outcome of that conflict. The difference is that unlike mediation, an arbitrator serves as kind of like a private-sector judge. They listen to the evidence and make a ruling. The other difference is that the arbitrator is in control of the process. They dictate when, where, and how things are going to be done, and they’re usually more flexible than courts. You don’t have to have a hearing date or discovery dates; they usually give you more flexibility than a private or public sector court. However, the difference is that the arbitrator’s ruling is final and usually binding on both sides. You may be able to appeal it or go to court, but that’s usually limited by contract or dictated by the court. That's the difference—one is not binding on the parties (mediation is voluntary), while the other is (arbitration is binding).

In mediation, the parties are in control, with the mediator facilitating and suggesting dates, times, and other elements. In arbitration, the arbitrator says, “Here’s how we’re going to do it,” and the parties must follow the process.

Hopefully, that clears up what the differences are. They’re both very valuable. Anything you can do to stay out of court is a good thing. Ask any lawyer—they’ll tell you to stay out of court. As soon as you go into court, the whole thing’s out of your hands, and you don’t have control over your destiny anymore. So, anything you can do to stay out of court—mediation, arbitration, negotiation, whatever it is—is a good thing. A neutral third party helps because it takes the feelings, thoughts, and maybe baggage out of the equation. If you are negotiating directly or even with your attorneys, you’re going to have some baggage involved. A neutral third party can help quite a bit in either case.