Mediation and Arbitration

The information provided below is general in nature and thus, may not apply to your situation. Before relying on this information, you should consult with your legal and/or tax professional.

Provided to replace the overworked court system for a beleaguered public, mediation and arbitration are the two most popular forums for resolving legal disputes outside of the court system.. The standard real estate contract includes provisions for mediation and arbitration. These provisions must be initialed by both buyer and seller to apply to the parties' transaction.

The purpose of mediation and arbitration is quick resolution and minimal expense. Achieving these two goals is reason enough to join the alternative dispute resolution (ADR) club. Time and money are two of our most valued commodities. But equally important is conservation of energy for our valued interests. If freed up, the vast amount of personal energy funneled into litigation can make a far more meaningful contribution to our lives. Thus, ADR serves a threefold purpose: saving time, money, and energy.

Binding arbitration entirely replaces the court system and the appeal hierarchy. Parties agreeing to binding arbitration no longer have access to the court or appellate system.

The Difference Between Mediation and Arbitration

Arbitration has been around for a long time. People know it. Mediation is relatively new. For this reason, these two processes are often confused. The truth is, mediation and arbitration couldn't be more different.

The purpose of both processes is quick resolution and minimal expense. Mediation is a voluntary process; the parties make their own decisions. Binding arbitration is an adversarial process. An arbitrator, usually a lawyer, retired judge or industry expert well versed in the topic of the case, decides who wins and who loses and renders an award. Arbitration is a far better forum than the court system, because it streamlines the legal process. It terminates the dispute, one way or the other, quickly and at a relatively minimal expense. It allows the parties to move on.

The biggest difference between the two processes is that mediation does not result in a decision, order, or judgment imposed on the parties. Even when required by contract, mediation is a settlement process and involves no decision making, other than the parties' decision to settle or not. Mediation is a no-fault, voluntary process that leaves the parties in charge of their case. Therefore the mediation process does not place blame; it is a means to settlement. Arbitration, on the other hand, is combat. It yields a decision by the arbitrator against one party in the form of an award.

When You Mediate, You Determine the Outcome

Often, parties confusing mediation with arbitration arrive at the mediation session ready to do battle, when they should be prepared to work toward settlement. This combative attitude impedes the mediation process, which must be approached with conciliation and resolve to succeed.

With mediation, the participants create and abide by their own settlement. It is true that the mediator facilitates, encourages, and directs the process. But no one makes decisions for the parties as a judge, jury, or arbitrator would. Instead, with the mediator's assistance the parties cooperatively and voluntarily determine their own outcome. They walk away from a mediation session knowing they have made their own decisions and resolved their matter in a conscious, intelligent manner. They are doubly satisfied. And usually mediation occurs early on, before the money and energy drain of the legal process has left its mark.

The Road After Mediation-Arbitration

Another distinction lies in the options available after mediation-arbitration. With mediation, if the case doesn't settle you still have litigation ahead of you - either in the court system or by binding arbitration if you have a binding arbitration agreement. Mediation does not replace any procedure; it just adds a valuable settlement step before litigation.

Arbitration, on the other hand, is an adversarial, mandatory process that puts the arbitrator in charge of the dispute. The parties give the arbitrator exclusive power to determine the winner and loser. The judge and jury of the court system is replaced with the arbitrator who makes a decision against one party and in favor of the other. The arbitrator's decision carries the same weight as a decision rendered in the court system. Thus, arbitration is combat in every sense. Each party is there to be determined winner or loser in legally enforceable black and white.

When the parties depart from the arbitration hearing, they leave with a judgment or receive it within a month. It is the ultimate and only decision. They are bound by it. When the mediation participants leave the mediation, hopefully they have signed a settlement agreement setting forth the terms they agreed to. Otherwise, they leave without a settlement, and with all their legal rights to proceed. One way or the other, their legal process is concluded or they are a step closer to conclusion.

The information provided above is general in nature and thus, may not apply to your situation. Before relying on this information, you should consult with your legal and/or tax professional.