Mediation vs. Arbitration: What Are They and How Are They Different?
Mediation and arbitration are two categories of “alternative dispute resolution,” also known as “ADR.” They are part of the ADR family because they are both “alternatives” to a court deciding which party is right and which is wrong.
Beyond that, mediation and arbitration share almost none of the same qualities.
Mediation is a voluntary process where the parties, aided by a trained mediator, try to resolve the dispute. The mediator acts as a neutral and does not decide the case. Instead, the mediator works with the parties, and their counsel if represented, to help them reach an agreement under terms that are mutually acceptable. The goal of mediation is to avoid or resolve litigation, on any terms that the parties choose to be part of the negotiated agreement. Many mediators are attorneys by training, but a legal degree or license to practice is not necessary. Mediation is also confidential. Parties who participate in mediation ordinarily sign an agreement at the beginning of the mediation where they confirm that what they say and learn during a mediation cannot be used in the dispute should litigation continue or become necessary. Many courts offer mediation as a free service, but parties frequently will agree to hire a mediator to help them resolve a dispute.
Arbitration is much more similar to a court proceeding than it is to mediation. The role of an arbitrator is to decide the case, not to help the parties negotiate a settlement. An arbitrator listens to witnesses and reviews documents, just like a jury or a judge, and determines the facts and applies the facts to the law. The decision of an arbitrator is called an “award,” and the award, if not complied with by the losing party, can be converted into and enforced as a court judgment. Arbitration awards can be challenged in court, but on very limited grounds, such as clear bias on the part of the arbitrator or an obvious flaw in the process. Unlike a court decision, an arbitrator’s decision cannot be overturned because the arbitrator got it wrong or made a mistake in the law.
Arbitration is similar to mediation in that the parties have to agree to use the process. The agreement to arbitrate is usually made in advance – the parties’ contract has a provision stating that any dispute will be decided by an arbitrator, not in court. On the other hand, parties more frequently decide to try mediation after the dispute has arisen. Arbitration differs from a court proceeding in several important ways: (1) there is no jury; (2) the arbitrator charges for his or her services (courts have filing fees, but they pale in comparison to arbitrators); (3) discovery tends to be significantly more limited in arbitration than in a court proceeding; (4) arbitration proceedings are private (they take place in an office conference room), not in a courtroom open to the public; and (5) appellate rights are much more limited in arbitration than in court. For all these reasons, a court proceeding ordinarily takes longer than an arbitration proceeding and tends to be less expensive even after including the arbitrator’s fee. Arbitration and mediation are both critical components of the American legal system. They both alleviate the burden on a court system that suffers from a lack of resources. That does not necessarily mean you should automatically use these processes in every dispute. The decision requires careful thought and may not be appropriate in every circumstance.