If you own a business and are navigating a dispute, if you are a car crash victim and are seeking compensation for the harm you’ve suffered or if you otherwise want to avoid court but need to resolve an important legal matter, you may have been told that you could benefit from exploring mediation and arbitration as options.
Mediation and arbitration are two popular methods of alternative dispute resolution (ADR). This means that they help parties to seek a resolution of their disputes without judicial intervention. However, they are distinct processes that offer different approaches to resolving conflicts outside of court.
Role of the neutral party
The most significant difference between mediation and arbitration lies in the role of the neutral third party involved. In mediation scenarios, the neutral third party is called a mediator.
The mediator’s role is to facilitate communication between the disputing parties and help them reach a mutually agreeable solution. The mediator does not make decisions or impose outcomes. Instead, they guide discussions, encourage compromise and assist the parties in finding common ground. The goal of mediation is collaboration, and the final resolution is entirely in the hands of the parties involved.
By contrast, in arbitration scenarios, the neutral third party is called an arbitrator. Unlike a mediator, an arbitrator has the authority to make binding decisions after hearing both sides of a dispute. The arbitration process is more formal than mediation, as both parties present evidence and arguments, and the arbitrator issues a decision that is final and enforceable, similar to a court ruling.
Ultimately, in mediation, the outcome is determined by the parties. If they are unable to reach an agreement, the mediation process ends without a resolution, and the parties may choose to pursue litigation or other options. On the flip side, arbitration results in a decision made by the arbitrator, and in most cases, this decision is final and binding, with limited grounds for appeal. For these reasons, mediation is generally a preferable option for most disputes.