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Law Basics: The Difference between Arbitration and Mediation

While "Arbitration" and "Mediation" are familiar to most people, the differences between the two dispute resolution methods are often confused. In this post, we will explain the primary differences between Arbitration and Mediation.

Alternative Dispute Resolution

Arbitration and Mediation are considered methods of alternative dispute resolution, or "ADR" for short. You may be asking, "what are these methods alternatives too?" The answer is simple; they are alternatives to litigation or lawsuits.


In general, when you have a dispute with an individual, business, employer, independent contractor, investor, partner, or others, you have three options to resolve the dispute. They are (1) filing a lawsuit, (2) file for Arbitration, or (3) requesting Mediation.


Most people understand the risks, costs, and time attributed to the litigation process. Depending upon the nature of the claim, lawsuits can last up to two years and, in some cases, even longer. If the case goes to trial before a jury, your fate is in the hands of strangers who have only come to know you briefly through your testimony. Finally, quality legal representation is not cheap. Sure, you can find a recently admitted lawyer willing to take on a case for a low hourly rate, but when it comes to litigation, you truly get what you pay for.


While there are times when litigation is the best path to take, many people prefer to use alternative dispute resolution as a means of reducing the cost and time associated with a dispute. ADR has become very popular in business and construction contracts. Many contracts require that all conflicts be arbitrated and restrict the ability of a party to file a lawsuit.

What is Arbitration?


Arbitration is an ADR process in which a neutral third-party (one or more individuals) hears both sides of a dispute and makes a binding decision.


Several large companies provide arbitration services throughout the country. These include the American Arbitration Association and JAMS, formerly Judicial Arbitration and Mediation Services, Inc. These companies have their own rules and procedures for handling arbitrations. Regardless of the rules or procedures, rulings made by an arbitrator or panel of arbitrators are final, binding, and cannot be appealed (except in extreme circumstances.)


PROS: The benefits of Arbitration are that the process is slightly less formal than litigation and can shorten the time needed to resolve a dispute fully. For example, a dispute which might take a year to resolve through litigation could be fully arbitrated within six months.


CONS: While Arbitration can be cheaper than litigation, it is still expensive. Most arbitrators require a large upfront retainer payment and filing fees to the arbitration company. Unlike a lawsuit, where you might have the right to appeal a decision, Arbitration is binding, and you cannot appeal. Another con is that an arbitrator is only involved in your claim for a brief time compared to a judge, who is usually part of the case from inception to resolution.


What is Mediation?


Mediation is another form of ADR but is significantly different from Arbitration in that the mediator's findings, suggestions, or opinions are not binding. A mediator is someone who attempts to assist parties in reaching a voluntary agreement.


A mediator is generally hired by both parties when they are mutually interested in resolving a dispute quickly and cost-effectively. There is usually no formal discovery process; instead, most mediators request a Mediation statement explaining a party's position be provided before the Mediation. The Mediation process involves the mediator trying to find common ground between the parties in the hopes of getting all parties to agree on an amicable resolution of their dispute.


PROS: Mediation can be cost-effective and reduce the duration of a dispute. While decisions made during a Mediation are not binding, the parties can agree to enter into a binding, written agreement. If the matter cannot be resolved during Mediation, the parties preserve their rights.


CONS: To get to Mediation, all parties must voluntarily agree to participate. Unless in writing and signed by all parties with the understanding that the agreement binds them, an agreement reached at Mediation cannot be used in Court. You could spend time and money Meditating a claim only to have it fail and require Arbitration or Litigation.

The big difference between Mediation and Arbitration is that rulings in Arbitration are binding, while agreements made during Mediation are non-binding.

The Big Difference

The big difference between Mediation and Arbitration is that rulings in Arbitration are binding, while agreements made during Mediation are non-binding.

Conclusion

Arbitration and Mediation can help resolve disputes, but it's essential to understand the critical differences between them before making a decision.


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If you would like more information about this post or if you want to discuss your legal matter with an attorney at the Law Offices of Peter J. Lamont, please contact me at pl@pjlesq.com or at (201) 904-2211. Don't forget to check out and subscribe to our podcast and YouTube channel. We have hundreds of podcasts and videos concerning a variety of business and legal topics. I look forward to answering any questions that you might have.

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As with any legal issue, it is important that you obtain competent legal counsel before making any decisions about how to respond to a subpoena or whether to challenge one - even if you believe that compliance is not required. Because each situation is different, it may be impossible for this article to address all issues raised by every situation encountered in responding to a subpoena. The information below can give you guidance regarding some common issues related to subpoenas, but you should consult with an attorney before taking any actions (or refraining from acts) based on these suggestions. Separately, this post will focus on New Jersey law. If you receive a subpoena in a state other than New Jersey, you should immediately seek the advice of an attorney in your state as certain rules differ in other states.


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