**This article is not a substitute for the advice of an attorney.**
Dispute resolution is a popular and common way to resolve legal disputes. Many people, however, are not aware of the difference between the two most common forms of dispute resolution, mediation and arbitration.
Why Dispute Resolution?
Litigation is time consuming and expensive. It generally takes over a year for a civil case to be decided in court. Dispute resolution provides a cheaper, and more time efficient alternative that will allow parties to resolve their differences and go forward with their lives. Although dispute resolution may not be appropriate for all cases, it should at least be considered when a legal dispute arises.
Many contracts actually contain terms requiring some form of mediation or arbitration, which impact a party’s right to seek relief in court. Arbitration clauses in particular may contain restrictions on who may be selected as an arbitrator, what procedural rules will apply, and what power a party may have to challenge an award. Such provisions are generally enforceable, and should be reviewed carefully by an attorney before a contract is signed.
Mediation is a confidential process by which a third-party mediator facilitates a conversation between the two parties so that they may reach an agreement between themselves. The parties may be in the same room, or may be kept in separate rooms. Communications between the parties generally go through the mediator. The parties will settle their dispute only if they both agree to do so on the same terms. The mediator will not, and cannot, order either party to agree with the other. If an agreement is reached, the mediator generally drafts a settlement agreement outlining the terms as agreed to by both parties. This agreement is signed by the parties (and their attorneys if involved), and is enforceable as a contract.
The main advantage of mediation is that it is flexible and allows the parties, themselves, to reach a resolution that they are able to agree to and to live with. If an agreement between the parties is not reached, the dispute may proceed forward in court. Generally, discussions or offers that occur in mediations are confidential and may not be used later in litigation. Oftentimes, courts will require mandatory mediation during the litigation process before a case goes to trial.
Unlike mediation, arbitration involves a third party arbitrator hearing evidence and rendering a decision on the dispute. Thus, the arbitrator acts essentially like a judge. The parties themselves have no control over the outcome of an arbitration. The parties usually select an arbitrator (or an arbitration panel of three arbitrators) who are experience in the legal area from which the dispute arises. Arbitrations are less formal than trials. For example, the admissibility of evidence may be more lax in arbitration than it would be in a court of law.
Arbitrations are classified as either binding or non-binding. A binding arbitration results in a final decision called an arbitration award. Thus, parties who participate in binding arbitration waive their right to a trial in court. The arbitrator’s decision is generally not appealable. An arbitration decision may be filed in court as the final disposition of a case.
A non-binding arbitration, however, is not a final judgment on claims and no arbitration award is entered. Instead, it is used by parties to evaluate how a third party will view their claim and to determine their settlement position. At the conclusion of non-binding arbitration, parties are free to proceed with their cases as they wish.