Arbitration vs. Mediation. What is the Difference?

In the realm of legal disputes, it is essential to explore various methods of resolution that are efficient, cost-effective, and ensure a fair outcome for all parties involved. Two commonly utilized approaches are arbitration and mediation. While both aim to reach a resolution outside of the courtroom, they differ significantly in their processes and outcomes. In this blog, we will delve into the world of arbitration, its processes, and how it differs from mediation. 

Arbitration is a dispute resolution method wherein parties involved in a legal disagreement agree to submit their dispute to a neutral third party, known as an arbitrator or a panel of arbitrators. This chosen arbitrator has the authority to render a binding decision, which both parties must abide by. Arbitration is typically conducted outside of the traditional court system and offers a private and confidential setting for resolving disputes. 

Here is how to manage the process of arbitration: 

1. Agreement to Arbitrate: Before the arbitration process commences, the parties involved must mutually agree to arbitrate their dispute. This agreement can be part of a contractual provision, such as in business agreements or employment contracts. By incorporating an arbitration clause, the parties acknowledge their intention to resolve any disputes through arbitration rather than litigation. 
2. Selection of Arbitrator: Once the agreement to arbitrate is in place, the parties select an arbitrator or a panel of arbitrators. The selection process often involves reviewing the arbitrator’s qualifications, experience, and expertise in the specific area of law relevant to the dispute. The chosen arbitrator should be impartial and unbiased to ensure a fair resolution. 
3. Preliminary Proceedings: Before the arbitration hearing, preliminary proceedings may take place, including the exchange of documents, the filing of statements of claim and defense, and the identification of witnesses or experts. These proceedings help define the issues at hand and streamline the arbitration process. 
4. Arbitration Hearing: The arbitration hearing is like a trial but less formal. The arbitrator(s) listens to the arguments and evidence presented by both parties. The parties can present witnesses, submit documents, and make oral arguments. The arbitrator(s) may ask questions and seek clarifications during the hearing. 
5. Decision and Award: After considering all the evidence and arguments, the arbitrator(s) will render a decision, known as an award. This decision is legally binding on the parties involved, meaning they are obligated to comply with the terms set forth in the award. The award is typically enforceable in a court of law. 

How is Mediation Different from Arbitration? 

While arbitration and mediation are alternative dispute resolution methods, they differ in significant ways: 

1. Decision-making authority: In arbitration, the arbitrator(s) have the power to render a binding decision that is enforceable. In contrast, mediation is a non-binding process where a mediator facilitates communication and assists the parties in reaching a voluntary agreement. The mediator does not make decisions for the parties. 
2. Level of formality: Arbitration proceedings are typically more formal, resembling a trial, with rules of evidence and procedure. Mediation, on the other hand, is less formal and encourages open dialogue and negotiation between the parties. 
3. Control over the outcome: Arbitration relinquishes control over the outcome to the arbitrator(s). The parties must accept and abide by the decision, even if it is not entirely satisfactory to either side. In mediation, the parties retain control over the outcome and can reach a mutually agreeable solution. 
4. Confidentiality: Arbitration proceedings are often confidential, protecting the privacy of the parties involved. In mediation, confidentiality is also upheld, promoting open and honest communication without fear of disclosure in future legal proceedings. 

Frequently Asked Questions: 

Is arbitration legally binding? 

• Yes, arbitration is legally binding. When parties agree to submit their dispute to arbitration and the arbitrator(s) renders a decision, known as an award, it carries the force of law. This means that the parties involved are obligated to comply with the terms set forth in the award. In most jurisdictions, the award can be enforced in a court of law if necessary. 

How is confidentiality maintained in arbitration? 

• Confidentiality is a key feature of arbitration proceedings. Parties often choose arbitration because it offers a private and confidential setting for resolving disputes. The details of the dispute, evidence presented, and the award itself are kept confidential. This confidentiality protects the privacy of the parties involved and encourages open communication during the arbitration process. 

Can arbitration be appealed? 

• In general, the grounds for appealing an arbitration award are limited compared to traditional court litigation. The ability to appeal an arbitration award depends on the jurisdiction and the applicable arbitration laws or rules. Typically, courts are reluctant to interfere with arbitration decisions due to the principle of finality. However, certain limited grounds for appeal, such as procedural irregularities or misconduct by the arbitrator(s), may exist depending on the jurisdiction. 

How is an arbitrator selected? 

• The process of selecting an arbitrator typically involves mutual agreement between the parties involved in the dispute. If an arbitration clause exists in a contract or agreement, it may specify the selection procedure. Parties often consider factors such as the arbitrator’s qualifications, expertise in the relevant area of law, reputation, and experience. If the parties cannot agree on an arbitrator, some arbitration institutions provide a list of qualified arbitrators from which they can choose, or they may utilize a panel of arbitrators. 

The arbitration process is less formal than court proceedings, but it is still important to prepare thoroughly for the arbitration hearing. If you are considering arbitration, it is important to consult with an experienced attorney who can guide you through the process and represent your interests. McCune Law Group is no stranger when it comes to bringing arbitration claims. Our Financial Services attorneys are bringing arbitrations claims against the biggest banks like Wells Fargo, Chase, and more for their unfair charging of overdraft fees.