What is the Difference between Mediation and Arbitration

So you need to resolve a legal dispute and must make a choice between these two alternative dispute resolution mechanisms? How do you choose and how does your choice affect the outcome of your dispute?

While the basic differences between mediation and arbitration lie in methodology, these differences may also affect the ultimate outcome of your dispute.  Therefore, it is helpful to know not only the basic differences but also the pros and cons of those differences.

In the most basic language, a mediation is a settlement while an arbitration is a decision on the merits of the case.  While both are considered alternative dispute resolution mechanisms in that both avoid a full trial, including the costs of the trial, you must prepare for each differently.

In a mediation, both sides of a dispute meet with a mediator who attempts to broker a settlement of the matter. It is usually more informal than an arbitration and also less costly. Usually, mediation is a good tool to use in situations where the parties are not too far apart in their demand and offer to resolve.

In a mediation, the parties agree on the mediator based on the mediator’s experience with their type of matter and on the mediator’s reputation for bringing matters to resolution.  A mediator is often, though not always, a person outside the court system. The mediator will inform the parties regarding what sort of briefing of the issues the mediator would like to see prior to the date of the mediation. Some mediators want a full briefing of a case’s strong and weak point in advance of the mediation. Some do not.

Often the mediator welcomes both sides, but soon separates the two sides and takes turns meeting with the parties individually, pointing out the strengths and weaknesses of each side to attempt to move both sides closer to a settlement figure.  A good mediator can listen well to both sides and can also lean on both sides to procure a settlement.

If the two parties cannot be sufficiently swayed, a resolution may not occur at this stage of the litigation. This has no effect on any issue in the continuing litigation.

An arbitration is an evidentiary hearing in a less formal setting than a court room. Its outcome may be a final resolution of the matter or it may be “rejectable” by one or both parties depending on the agreement of the parties prior to arbitration.

Much like a judge, an arbitrator is a finder of fact.  He or she will decide who “wins” and how much in damages that side will obtain. That then becomes the order of the court in the civil litigation and the matter is then resolved. An arbitrator needs to be able to listen well, but does not need any negotiating skills.

An arbitrator should know the area of law at issue quite well.  Most arbitrations occur in an office, but with a full presentation of briefs, testimony and other evidence.  The presentations are often informally done.  An arbitrator will take in all of the evidence and issue a written decision within a specified time.

Because more evidence is produced at arbitration, it is usually more costly than mediation. An arbitration can take several days if a matter is complex. A mediation seldom takes more than one day. 

In addition, a mediator often “splits the baby in two.” It is often said that no one is happy with a good settlement.  And that is often true. The defense usually has to pay more than is desired and the plaintiff usually has to take less than is desired. That is the nature of settlement. Mediation is often best for cases where both sides have weaknesses in their cases.

In an arbitration, the fact finder makes an award based on the legal and factual issues.  There is no splitting of the “baby” in this case.  Arbitration is usually more successful later in the litigation as more information is obtained regarding the strengths and weakness of the case. It is often used with success when a case is strong with few weaknesses.