How do mediation and arbitration differ?

On Behalf of | Jul 20, 2022 | Business & Commercial Law

Managing disputes can be a messy and time-consuming process, which is why most business owners avoid it. However, sometimes disputes do arise, and understanding how to handle them is paramount.

Avoiding litigation is often best for all parties involved in a dispute. Thus, both arbitration and mediation are popular alternative dispute resolution measures. According to Findlaw, in opposition to mediation, arbitration typically involves a panel and is binding.

Typical arbitration process

Arbitration has a very similar look and feel to litigation. Both sides of the dispute will present their case, and then a judging body makes the final decision. In most arbitration cases, the “judge” is actually a panel of arbitrators: there are normally three. It is common for one side to select the first arbitrator for the panel, and for the other side to select the second arbitrator. Both sides compromise on the third member of the panel.

Arbitration is typically a binding process. This means that it is usually not possible to appeal the decision of the panel.

Typical mediation processes

Mediation has a more “relaxed” approach. With this process, there is usually only a single mediator present. The mediator does not issue a ruling the way a judge does; rather, the mediator helps both sides of the dispute negotiate. This can often lead to more amicable outcomes between the parties.

In the majority of cases, mediation is non-binding. This means that there is a chance of the dispute moving to litigation or a binding arbitration process if it arises again between the parties.

As methods of resolving business disputes, both mediation and arbitration are typically faster and cheaper than litigation, allowing business owners to get back to their core operations with as little damage to their finances and reputation as possible.