Arbitration vs. Mediation: What’s the Difference?
When Americans have a legal dispute against each other, the traditional dispute resolution process is civil litigation — i.e., trial. But trials, which pit a plaintiff against a defendant, can be combative, ultimately leaving the parties with a judgment but no future relationship. A trial can also be a painfully slow process; given the backlog in many courts and the fact that the losing party can appeal, it can take years for a single case to be resolved. And that resolution doesn’t come cheap: trials are dominated by lawyers, and lawyers are expensive.
Because of these downsides of civil litigation, parties increasingly choose to bypass court and turn instead to alternative dispute resolution (ADR) to resolve legal disputes in a faster, cheaper, and (often) less contentious manner. Arbitration and mediation are two common forms of ADR.
Arbitration and Mediation: Two Approaches to ADR
Because mediation and arbitration are two of the alternatives to civil litigation, it helps to first discuss what’s generally involved in civil litigation.
Features of Civil Litigation
A judge is assigned to the case and presides over the proceedings.
The proceedings take place in court.
The parties present arguments, evidence, and witnesses.
The parties must follow certain rules regarding trial procedure and evidence.
Lawyers typically dominate the proceedings.
Trials can be contentious.
The trial process can be lengthy and expensive.
A judge or jury considers the evidence, applies the law, and decides on a winner and a loser as well as (in most cases) the amount of damages to be paid by the loser.
A resolution is always reached, though the parties may not agree with it.
The decision is binding on the parties.
The loser has an automatic right to appeal.
Although arbitration differs considerably from mediation, both types of conflict resolution share some common features, with two main overriding similarities: they provide a faster and (typically) cheaper alternative to civil litigation, and they allow the parties more control over the process of resolving their legal dispute.
Features Common to Arbitration and Mediation
Instead of having a judge preside over their legal dispute, the parties retain a third party (either an arbitrator or mediator) to assist in resolving the conflict. Unlike civil litigation, where the parties generally have no say in which judge is assigned to their case, in arbitration and mediation, the parties can generally choose the exact third party they want (with some exceptions in the case of arbitration). The selection of an arbitrator or mediator usually involves some negotiation between the parties.
Arbitrators and mediators are not sitting judges. They may be retired or former judges, former lawyers, or other professionals; they may be required to be certified (depending on the rules of the state in which they practice). Arbitrators are often professionals from other industries (e.g., construction, accounting) who use their expertise and experience to arbitrate disputes relating to their field.
The proceedings take place outside of court. For example, they may be held at the arbitrator's or mediator's office.
The process generally takes significantly less time than trial, which means it’s also far less expensive.
An arbitrator’s decision may or may not be binding. A mediator doesn’t make a decision.
Arbitration
Arbitration is a more formal dispute resolution process than mediation, and it can be compared to a minitrial. The goal of the arbitration process is for the parties’ dispute to be decided by a neutral third party in a manner similar to, but faster and less costly than, a trial. Typically, the parties voluntarily choose to arbitrate their dispute rather than going to trial, though in some cases, a court may order arbitration. Also, arbitration may be required in certain contracts or certain other situations. In such cases, the arbitrator (or arbitration panel) and the specific rules to be followed during the arbitration proceedings may also be mandated.
Features of Arbitration
The parties commonly present arguments, evidence, and witnesses.
The parties can often negotiate many aspects of the arbitration proceedings, including whether the decision (called the “arbitration award”) will be binding, whether lawyers will be involved, and what rules of evidence will be followed.
With or without lawyers, the minitrial setup can make arbitration contentious.
Arbitration generally takes much less time than litigation, which makes it cheaper.
The arbitrator (or a panel of arbitrators) considers the evidence, applies the law, and decides on a winner and a loser as well as the arbitration award (generally, an amount of damages to be paid by the loser).
A resolution is always reached, though the parties may not agree with it.
The decision may or may not be binding.
The loser does not have an automatic right to appeal but may do so on limited grounds.
Mediation
Mediation is a much less formal process, and it can be compared to a business negotiation overseen by a neutral third party. Mediation's goal is for the parties to reach a compromise acceptable to both, with a signed settlement agreement often resulting from the process. In some cases, another goal of mediation is for the parties to walk away from the proceedings with their relationship still intact, a result that cannot always be achieved through the often confrontational process of civil litigation and arbitration.
Features of Mediation
The parties may or may not present formal arguments to the mediator, and they generally do not present evidence or witnesses.
In a typical mediation session, the proceedings start with a meeting between the parties and the mediator. The mediator may invite the parties to make opening statements, or the mediator may make some introductory statements.
After the opening session, the mediator usually puts the parties in different rooms and then travels back and forth between the rooms to speak privately with each party. During these private sessions, the mediator usually points out each party's weaknesses to coax them into settling the dispute rather than continuing to fight. The back-and-forth sessions can take all day or several days.
Although parties to large commercial disputes are generally represented by lawyers during mediation, parties to other legal disputes can often speak on their own behalf without a lawyer. For example, family law disputes often involve only a mediator and the parties. This cuts down on the parties’ costs significantly.
Because mediation is set up like a moderated negotiation, with both parties giving and taking, the process tends to be much less contentious.
Mediation is generally faster than arbitration, making it the cheaper of the two.
The mediator doesn’t make a decision; the parties either decide to agree on a resolution or agree to give up mediation efforts and go to trial. The parties’ agreement may be based in part on the law but also may be governed by non-legal factors such as the desire to avoid the costs of continued dispute and/or to preserve their relationship.
A resolution may not be reached. However, if one is reached, it’s an outcome the parties agree to.
Mediation vs. Arbitration: Which One Is Best for Your Dispute?
The lists of features above can be distilled down to a short list of the ways arbitration can be better than mediation and vice versa.
Arbitration can be better than mediation if it’s important to the parties that an actual outcome is reached and that such an outcome is based on the law. These benefits make arbitration a good choice for parties embroiled in complex legal disputes that are suitable for trial but where the parties want a faster, cheaper solution (e.g., contract disputes, significant real estate matters, employment law matters, complicated business disputes, etc.).
On the other hand, mediation can be better than arbitration if it’s important to the parties that they control the outcome, the proceedings are less formal (and less intimidating), and confrontation is kept to a minimum. These benefits make mediation a good choice for parties who want to preserve their relationship, such as neighbors, business associates, family members, and divorcing parents who must co-parent together in the future.
Med-Arb: Combining Mediation and Arbitration
As its name implies, Med-Arb is a hybrid alternative dispute resolution approach that combines mediation and arbitration. In Med-Arb, the parties first try to reach an agreement through mediation. If mediation breaks down, or if not all issues are resolved through mediation, the parties can switch to arbitration. If the mediator is also a qualified arbitrator, they can simply switch roles from mediator to arbitrator. If they’re not qualified, the parties can bring in an arbitrator to take over after mediation breaks down.
One use of Med-Arb is in the family law context. In a divorce, for example, the divorcing couple may be able to resolve certain matters (e.g., division of assets) through mediation but may need to move to arbitration to resolve thornier issues such as parenting time and child support.
Future Lawyers and ADR
Because so many parties are turning to ADR as a way to avoid the time and cost of trial, any future lawyer could be involved in some form of ADR on behalf of their client. Future lawyers should familiarize themselves with the different forms and benefits of ADR, including arbitration, mediation, and the hybrid Med-Arb.
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