Mediation vs. Arbitration: What’s the Difference?

When you are involved in a legal matter, you can try to reach a settlement with or without an attorney by your side, and with or without a local court or judges. These choices are involved in the two main forms of dispute resolution at your disposal: mediation and arbitration.

The biggest differences between mediation and arbitration is the role of the mediator or arbiter as well as the legally binding nature of any resolution. In either situation, you will meet with the other party or parties involved in the dispute process where you can both choose to have attorneys present to help you, but it’s not a requirement.

Understanding the difference between Mediation and Arbitration

By understanding the difference between mediation versus arbitration, you can decide which one is most appropriate to your dispute situation. If, for example, you are dealing with an industry conflict, workplace dispute, or legal issue involving investors or an employee, a traditional court might not be the best way to reach a legal conclusion. This is because traditional court can be time consuming and negotiations can be complicated and involve a lawyer. In fact, it might not be allowed at all if you had a pre-existing agreement. As such, when traditional court is not an option, you can choose mediation or arbitration.

What is mediation?

So how how does arbitration differ from mediation? Mediation is a type of private legal dispute resolution where you meet with a certified mediator alongside any other parties involved in the dispute and discuss the dispute. The National Association of Certified Mediators provides certified professionals whose job it is to help both parties talk and come to an agreement without using a traditional court system. It is important to note that the mediator is not there to make a decision on your behalf and the outcome of the mediation process is only legally binding if all parties involved come to an agreement and sign paperwork to that agreement. In some cases, you could try mediation for something like a custody battle or a probate settlement and find that no resolution is achieved, so now you must pursue other legal means to reach a settlement.

What is arbitration?

Arbitration is handled by the American Arbitration Association whereby a neutral, third-party arbiter is assigned to your case. In arbitration, you present your evidence and information related to the dispute and the other parties involved provide their facts and information. Once all information and evidence has been presented, the arbiter then reviews all of the information and makes a legally binding decision about the dispute. Arbitration is effectively a microcosm of the court system, where the arbiter is like a judge in a traditional courtroom, and they have the legal power to make a decision about the case and legally enforce it.

When to Use Arbitration vs Mediation

So, when should you use mediation vs arbitration?

Arbitration is typically used in legal situations involving companies. Often, service providers like telecommunications companies or any company that has a contract or terms of use associated with their customers will provide a stipulation in their contract that the company cannot be sued via a class action lawsuit. Instead, customers are allowed to use legally binding arbitration to pursue a settlement to their dispute.

On the other hand, mediation is reserved for situations where you need help facilitating a conversation between parties to resolve the matter. As such, mediation is often used as a preliminary step, particularly in the field of family law, or in an office where a disagreement may arise. Mediation can provide an opportunity for both parties to speak openly and come to a compromise or agreement about how to settle the dispute, without needing to pursue a costly and time-consuming court case.

Comparing Arbitration & Mediation

So what is mediation vs arbitration? The difference between an arbiter vs mediator is that a mediator is there to facilitate a conversation between the involved parties while an arbiter functions like a judge, reviewing all presented information and evidence in a case, comparing it to the rules that are in place, and making a decision.

The main difference between arbitration and mediation is effectively the legality of the final decision(s). The table below offers a comparison between arbitration and mediation:

ArbitrationMediation
A legally binding decision is made by the arbiter.The mediator does not make a legally binding decision. Instead the legally binding agreement falls to the parties involved. 
Usually involves extensive discovery, meaning a lot of documentation and evidence is presented to the arbiter, similar to a court case.There is often very little discovery, with parties only exchanging information that helps them reach a settlement.
The arbiter is in charge, listens to both sides, and makes a decision to which all parties are bound.The mediator is there to facilitate communication between the parties, not to pass judgment.
Parties present their cases under oath.Parties can talk about their feelings or tell their side of a story in order to solve a problem. They are not under oath.
A formal process which often involves attorneys.An informal process that does not require legal representation.

To begin the process of arbitration, start by contacting the American Arbitration Association and filling out the necessary paperwork. This organization has private forms that you use to explain your dispute and upload any additional evidence. If you are working with an attorney, they can do this paperwork on your behalf. The arbiter will schedule a meeting with all parties involved, either in person, over the phone, or sometimes even via email, depending on the situation. Based on the information and evidence presented, the arbiter will explain their findings and the outcome of the dispute resolution process. They will then file all the necessary documents with the courts and legally enforce the resolution. 

To move forward with mediation, start by contacting your local courts or state-specific mediation organization to find a mediator in your area. The mediator will work with all parties involved, and any attorneys, to set up a date for mediation. The actual process of mediation (i.e. discussions between parties) takes several hours, and can take multiple meetings if no decision is reached initially. During these meetings, the mediator will use certain language or tactics to try and get everyone involved to express themselves clearly, explaining what went wrong, why it was a violation, why a decision would be in the best interest of one party over the other, and what resolution they are looking for. If an agreement is reached, the mediator will draft a written version of agreement and have all parties involved sign it. This agreement then gets filed with the courts.

Success Rates of Mediation and Arbitration in Modern Litigation

Most people try to avoid litigation because it’s time-consuming, expensive, and unpredictable. You do not have a lot of control over the outcome of your case. For that reason, alternative dispute resolution, or ADR, is very common.

Mediation has become increasingly popular where, in States like Florida, almost all lawsuits are legally required to try mediation before pursuing litigation. The Florida State Senate decided that mediation was so powerful and cost-effective as an alternative to litigation that people should be required to at least try and communicate more efficiently and find a settlement on their own before they are legally allowed to present their case to a judge.

Benefits to mediation and arbitration:

  • Mediation is great for divorce situations or real estate disputes.
  • Arbitration has been very successful for commercial and workplace lawsuits, especially issues involving customers who are dissatisfied with services provided by a company.

However, you do not have to wait for disputes to become lawsuits, or for your state to legally require mediation in order to use the mediation process. It can be used in any situation. In many cases, mediation at least allows all parties to get their side of the story ‘off their chest’ and feel like they were legitimately heard.

How to Work in Dispute Resolution

Professionals can pursue a degree or certification in dispute resolution. This advanced education provides an opportunity to learn how to facilitate peaceful negotiations and solve disputes between multiple parties, without having to go to trial. In many states becoming a mediator is very simple and requires completion of a single course after which you can get certificatied by completing a set number of practical hours. 

Ups And Downs

Mediation and arbitration have similar ups and downs. For example:

  • If you live in a location far away from the courts, you can still likely use mediation or arbitration closer to home. For this process to be successful, all the parties simply meet where it is convenient, and in certain cases, you can even handle the process over the phone.
  • Both options are significantly less expensive. The actual cost for arbitration or mediation is typically a one-time fee that all parties split,  plus any additional fees for private attorneys you want to be involved. You may incur fees for extra paperwork or court filing if you use arbitration, but these fees are nominal compared to a full lawsuit.

Mediation

Here’re essential things about mediation you need to know:

Advantages of mediation

Mediation gives you a chance to talk with a neutral party without airing private details related to your dispute publicly. On the other hand, if you file a lawsuit to try and settle an issue, all the evidence and information presented in the case is made public. With mediation, you can avoid a lawsuit, meet with someone who is trained to help facilitate a better discussion between you and the other parties privately, and keep all details of your dispute private.

Disadvantages of mediation

Compared to arbitration or litigation, with mediation, you may not have legally binding control over the outcome. This means that you are forced to rely on the mediator or any pre-mediation contract to try and negotiate an agreement with the other party. If your dispute involves a violation of company procedure, fraudulent activity, or issues regarding investors or employee rights, then you aren’t negotiating with a neutral third party but rather spending your time trying to find a solution to your dispute with the people with whom you are at odds.

Arbitration 

Here’re essential things about arbitration you need to know:

Advantages of arbitration

Arbitration is sometimes a requirement in customer contracts, such as user agreements with your cable company or cell phone provider. The fine print of most user agreements for such large companies stipulates that you cannot file regular claims or class action lawsuits against the company but instead must use arbitration. If you have a dispute with a provider and even if you can’t use litigation, you still have rights.

Another advantage to arbitration is that the outcome is legally binding. The law states that decisions made by an arbiter are final. Once a decision is made, then the issue is settled.

Disadvantages of arbitration

Compared to mediation, by using arbitration you give up a lot of control. Some people find that the stricter legal procedure associated with arbitration is more intimidating, because if the other party has a valid claim the ADR process might side with them. This means that once a decision is made, you or your company are legally bound to whatever settlement or compensation is decided upon by the arbiter. 

Final Words

When deciding between mediation and arbitration, you must consider your situation and the legal conclusions. If, for example, you are trying to get a settlement from a vacation property rental company or delivery company because they failed to honor their agreement or they overcharged you, you might be required by your user agreement to use arbitration. If instead, you are ending a marriage and/or determining custody rights, you are not looking for someone to render a decision on your behalf but instead, you are looking for someone to help guide you through the legal process, mediation might be a better option for you.

Article by Inna Ptitsyna

Inna Ptitsyna is PR Manager for Lawrina. Inna has a law degree and great expertise in legal innovations. Along with the work for Lawrina, Inna is a part of the international community of Legal Hackers where she gives presentations about the importance of PR and marketing for lawyers.

At Lawrina, Inna communicates with bloggers and external resources to spread the word about Lawrina's projects and ideas. If you'd like to contact Inna, you can reach her via email inna@lawrina.com.

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