What Is The Difference Between Mediation And Arbitration?
June 15, 2018
Alternative Dispute Resolutions (ADR) are ways of settling disputes without going through the entirety of the litigation process. In many cases such as divorce, civil disputes, or labor-management cases, judges will urge parties to consider alternative dispute resolutions to save time and money. Time will be saved because trials can take substantially longer to conclude versus parties that decide on a method of alternative dispute resolution. Money is also saved because there are less court fees and lawyer fees for all parties involved. ADR is simply a method of negotiation between two parties without going through the full-blown litigation. The two most common forms of alternative dispute resolution are mediation and arbitration. Many law firms have resources to perform these functions along with their other additional services.
Mediation is also known as conciliation, and is the most popular form of alternative dispute resolution. Mediation involves a neutral third party, called the mediator (or facilitator), that considers the concerns of both parties and comes up with a fair settlement. Mediation involves five steps:
The mediator gets the consent of both parties of how and when the mediation sessions will take place. A confidentiality agreement is then signed between both parties. This step is beneficial just for the fact that both parties are agreeing to something, even though it is merely an agreement for ADR.
Both parties talk to each other; they address their concerns face-to-face with the other party. Usually this is the first time one of the parties hears the opposing party’s side of the story without interruption. This is a crucial step in the process for both parties, and they may begin to realize that compromise might not be so difficult.
The mediator hears the stories of both parties. The meetings between one party and the mediator are kept completely confidential, and the mediator listens to the settlement demands of each party.
The mediator attempts to counteroffer with both parties. In this step, the mediator is basically bargaining with each side to come up with a fair compromise.
In a successful mediation, the fifth step is signing a settlement agreement between the two parties.
It is important to note that in mediation, the mediator is not allowed to attempt to sway one party towards the other’s demands. The mediator merely is there to address concerns between two parties that might not be willing to talk with each other face-to-face (which is why mediation is highly recommended in divorce cases and other disputes between family).
Arbitration is more closely related to a traditional court proceeding. In arbitration, both parties agree on a neutral third party to make a final decision on the settlement, which is court binding. Once a neutral third party has been chosen, then proceedings are generally conducted in a generally less formal version of full litigation. There is no appeal process in arbitration, so when both parties decide on this method of ADR, the case is ended. This makes arbitration final and binding.
Arbitration is typically used in cases that involve employees and management. Both employees and managers usually find that having a competent arbitrator is mutually beneficial, as it is cheaper and faster. The decision of the neutral third party is legally binding though, so neither employee nor manager can dispute the final decision once it has been made by the arbitrator.
What Is The Difference?
Mediation has the option for appeal, and the decision made by the neutral third party is not legally binding. Either party can still opt to go to trial if they are not satisfied with the compromise the neutral third party has proposed.
If two parties decide on arbitration, the case is immediately ended because the settlement proposed by the neutral third party is legally binding. In arbitration, neither party can choose to continue the dispute in court, and the settlement chosen by the neutral third party is final.
Thanks to our friends and contributors from Cohen & Cohen, P.C., for their insight into mediations and arbitrations.