In the vast majority of instances, it is not in the best interest of a business to take a dispute to litigation. Litigating can be extremely expensive and time-consuming, and it can also cost you positive relationships. To avoid litigating, some businesses choose to mediate or arbitrate. Mediation and arbitration are similar, but do have some key differences. According to FindLaw, the biggest General difference is that mediation is a non-binding collaborative process, while arbitration is a binding adverserial process.
What is mediation?
With mediation, both parties involved in the dispute will choose a neutral mediator. The mediator does not make a decision about the dispute, but rather guides both parties through a conversation with the object of reaching a settlement of the dispute. When a mediation is successul, it ends with a new agreement between the parties. However, mediation is typically non-binding, which means that if you mediate a dispute and the parties can not reach a compromise, you may end up in a courtroom anyway.
What is arbitration?
Arbitration is where the feuding parties choose either a single arbitrator or a panel of arbitrators. The arbitrator listens to both sides present their case, and then issues a written opinion or “award.” The award can often easily be converted into a regular judgment. Arbitration is very similar to litigation, but is often much quicker and costs less money. Arbitration is also generally binding, which means that whatever the arbitrator decides is how the parties resolve the situation. It is very difficult to reverse an arbitrator’s award, even if the arbitrator makes a decision that is surprising in light of established law.
A big advantage of arbitration is that the parties can choose who the arbitrators are, which may make sense in certain specialized business disputes. In litigation, the courts randomly assign a judge.