Mediation vs. Arbitration – What is Alternative Dispute Resolution (ADR)?

A courtroom trial is not the only way to resolve a legal dispute.  Even if parties are actively litigating a case through the traditional court system, parties can attempt negotiation and settlement by using alternative dispute resolution (“ADR”).  Mediation and arbitration are the most widely used ADR methods because they are generally confidential, less formal, less expensive, less time-consuming and less stressful than traditional court proceedings.

The Difference between Mediation and Arbitration

In mediation, the parties negotiate to try to reach a settlement, whereas in arbitration, a ruling is made by a neutral arbitrator after an adversarial hearing.  In mediation, a neutral mediator acts as a settlement facilitator and will usually present their opinion as to the likely outcome of the case to move the parties towards settlement.  The mediator’s role is to help the parties reach a voluntary settlement.  Since it is not binding on the parties, mediation is only successful if the parties mutually agree on a resolution.  Compared to traditional litigation, a successful mediation allows for more creative solutions, longer-lasting outcomes, greater satisfaction, and improved relationships.  For antagonistic parties or parties with unrealistic expectations about the outcome of the dispute, mediation may be the only opportunity to resolve the dispute without proceeding to trial.

Like traditional litigation, arbitration allows the parties to engage in discovery and present their cases to an arbitrator and concludes with the arbitrator making a ruling.  Unlike courtroom litigation, arbitration is private and confidential and the proceedings are not matters of public record.  Arbitration can be either binding or nonbinding.  In non-binding arbitration, the losing party can request a new trial in the traditional court system.  Former judges are routinely hired to serve as arbitrators in nonbinding arbitration because their experience and credibility lend weight to their rulings and force parties to critically evaluate their settlement positions.

Which Approach Applies?

Arbitration is usually more expensive than mediation, though less expensive than litigation.  Cost and time savings may not be realized if the mediation or nonbinding arbitration is unsuccessful because the parties will then still need to engage in traditional litigation to achieve a resolution.  Both mediation and arbitration can be required by a contract or can be agreed to by the parties after a dispute arises.  A contract requiring either mediation or arbitration will usually state the type of arbitration or mediation by referring to a specific organization or method of ADR.

ADR provides parties to a business dispute with an alternative to expensive and time-consuming litigation in the court system.  There are many reasons and benefits to use ADR.  The attorneys at Skufca Law are experienced business attorneys who can explain how ADR could help resolve your business dispute for a fraction of the cost of a traditional lawsuit.  For more information, please contact the attorneys at Skufca Law at 704-376-3030.

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