Most people have likely heard the terms Alternative Dispute Resolution (ADR), Arbitration, and Mediation mentioned in different contexts, but many may not know exactly what they are and how they differ.
“Alternative Dispute Resolution” is generally any procedure for settling disputes by means other than litigation. “Arbitration” and “Mediation” are two types of ADR; although not the only two. There are also different forms of arbitration, such as Baseball Arbitration, and different forms of mediation, but that is a topic for another day.
The end-game of mediation and arbitration is the same, that is, to have the disputing parties resolve their dispute and evidence the terms of that resolution or settlement in writing. The major difference is the way in which that goal is achieved.
What is Mediation?
Mediation is an informal process where an impartial third-party helps the disputing parties find a mutually satisfactory solution to their differences. Mediation is a voluntary, confidential extension of the negotiation process where a facilitator guides the parties toward a mutually agreeable settlement. This is achieved by helping the parties clarify their underlying interests and concerns, and encouraging compromise and trade-offs based on the relative importance of each item to each party (not necessarily a tangible item). It is often used where the parties are at a stalemate in their own negotiations.
The mediator’s job is to facilitate a discussion or negotiation between the disputing parties to keep the parties talking and to help move them through the more difficult areas of disagreement. Mediators are not judges and they cannot give legal advice. They never impose a decision upon the parties; rather, they help the parties reach a mutually satisfactory agreement that they’re both motivated to sign and honor.
Mediation is a particularly well-suited process for disputing parties who want to play an active role in determining the outcome of a dispute because it provides an opportunity for parties and their representatives to work through issues with the assistance of an impartial third-person trained to facilitate resolution.
What is Arbitration?
Arbitration is a procedure whereby two or more parties agree to have an unbiased, neutral, third-party (or third-parties) act as judge and jury to resolve their dispute for them, outside of the court system. It is a simplified version of a trial involving limited discovery and simplified rules of evidence and usually decided by either 1 or 3 arbitrators. After giving the parties the opportunity to present their side of the story and to present any relevant documents or other evidence, the arbitrator(s) decide, based on the evidence, who wins and who loses the case. Arbitrators are typically not bound by the laws and procedures that attorneys and judges must adhere to. The parties typically agree to establish their own rules and procedure, or agree to a particular administrating organization’s existing rules and procedures – such as those used by eQuibbly.com.
If the parties agree in advance to “binding arbitration”, the decision of the arbitrators is usually enforceable in a court of law if the losing party does not comply with the terms of the decision. If the parties agree in advance to “non-binding arbitration”, the decision is not enforceable in a court of law; this form of ADR is sometimes used to give the parties an indication of the respective merits of their cases; that is, a reasonable approximation as to which party might win or lose in binding arbitration or in some circumstances, in litigation. The parties are still able to pursue their case in court following non-binding arbitration.
Arbitration is more similar to traditional litigation than is mediation. One important difference to litigation is that, unlike court decisions, arbitration offers limited rights of appeal after a decision is made by the arbitrator. Many contracts, including some consumer contracts like your cell phone service contract or credit card application, have clauses which require that disputes arising out of that contract be subject to binding-arbitration rather than being litigated in court. This helps companies keep their costs down and keep their disputes private.