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Why and when arbitration or mediation make sense

| Jul 8, 2020 | Mediation and Arbitration, ADR |

Business litigation can be disruptive, time consuming, expensive and emotionally exhausting. Just getting to court can take a year or more, as dockets are overflowing. As a result, parties involved in disputes are increasingly turning to mediation or arbitration as an alternative dispute resolution (ADR) strategy. In order to make the best decision to resolve a commercial dispute, parties need to have a comprehensive understanding of the differences between arbitration, mediation and litigation.

Both mediation and arbitration help parties resolve disputes through a process that is typically less confrontational than litigation. However, they take a decidedly different path to reach that goal. A key point of differentiation is that mediation is a non-binding process that can be followed by litigation if a resolution is not reached, while arbitration is usually binding and replaces the trial process. It is possible to have binding mediation or have arbitration be non-binding, but it is not common.

It’s possible to mediate and arbitrate a case

An agreement to arbitrate a dispute rather than litigate often is written into a contract before a dispute exists. Parties commonly agree to mediation after the dispute has arisen. It is possible to mediate one portion of a dispute and arbitrate or litigate another part.

Mediation is typically conducted with a single mediator who facilitates discussion while remaining neutral. Arbitration generally has multiple panel members (often three) who serve as judges. Arbitrators may be selected through a system of striking and ranking potential candidates, or each party in the dispute may select one arbitrator and those arbitrators select the third tribunal member.

Understanding the mediator’s role

A mediator is not a decision-maker. A mediator’s role is to improve communication between the parties, offer possible resolutions and move them toward a negotiated settlement. A mediator may offer an assessment of a dispute and suggest a resolution, and then it is typically up to the parties to accept or reject that as a settlement.

Parties can keep proceedings confidential in both mediation and arbitration, which is another reason why they are popular alternatives to litigation. Both processes also foster a continued relationship between parties following a resolution, whereas that may be more difficult following litigation.