What are the Differences Between Mediation and Arbitration?

Clients often raise questions about Mediation and Arbitration and the differences between these two alternate dispute resolution procedures.

People frequently confuse one with the other, or believe they are the same thing.

In fact they are quite different.

Mediation is usually a process voluntarily agreed to by parties to a dispute to try to mutually agree to settle the dispute with the assistance of a neutral third person mediator.

In many cases mediators are attorneys or retired judges, but in other cases the mediator is a neutral third person with experience in the type of business or industry out of which the dispute arose.

In Mediation, the parties meet together with the mediator in a conference room, or sometimes privately in separate rooms, explain the dispute and their arguments to the mediator, and he or she attempts to get the parties to reach a compromise agreement, which may be signed by the parties at the end of the mediation, or shortly thereafter.

The statements made in/and documents prepared for use in the mediation are usually confidential by law, and may usually not be admitted in evidence in any later legal proceedings, except by agreement of the parties.

Similarly, the mediator cannot be compelled to testify in Court as to the mediation proceedings.

But a settlement agreement signed in the mediation usually can be enforced in Court.

Parties may, but are not required to, have attorneys present at the mediation to present their arguments or otherwise assist them in the mediation, or advise as to the legal terms of any settlement reached.

Costs of the mediation are usually shared equally by the parties, unless agreed otherwise, and can range from a few hundred to several thousand dollars a day.

Many contracts, including Real Estate and Construction Contracts, and others, require the parties to first attempt to resolve their disputes in mediation, before proceeding to arbitration or a lawsuit. Such contracts often provide that failure to mediate a dispute before filing suit or commencing arbitration results in the waiver of any right you might have to recover attorneys fees in such subsequent proceedings.

Failure to mediate first, if required, may also result in a delay in or stay of the lawsuit or arbitration.

Contracts often require parties to resolve their disputes by binding arbitration (sometimes after first attempting to mediate their dispute. Or the parties can also stipulate after-the-fact to have an existing court or other dispute submitted to and resolved by binding arbitration.

Arbitration is a trial-like, private, dispute resolution process, in which the decision or “award” of the arbitrator is binding and enforceable against the parties, and the award can be converted into an enforceable Court Judgment.

It is a substitute for or an alternative to a trial on the dispute in a Court.

Some arbitration proceedings are non-binding, either by statute or agreement, but these are atypical.

In a neutral arbitration, the arbitrator - usually, again, an attorney or retired judge - hears the testimony of witnesses, receives exhibits and evidence, allows cross-examination of witnesses etc., much like in a bench trial in Court before a judge, but the proceedings are held in a private room and are usually not open to the public. In larger cases there maybe three arbitrators.

Parties can often obtain documents, take depositions, and subpoena documents and witnesses in pre-hearing “discovery” procedures also similar to - but usually more limited than - Court proceedings.

The time to reach a decision or an “award” is usually faster then in Court proceedings, but the parties must pay (usually split) the fees of the arbitrator(s), which can amount to several thousand dollars each per day of hearing.

The proceedings are usually governed by Rules of the private arbitration association referred in the Contract or submission agreement (e.g., the American Arbitration Association, Judicial Arbitration and Mediation Service, etc ), or else by Federal or State arbitration statutes.

The arbitrator(s) may also establish some unique arbitration procedures for the particular dispute.

In all but smaller cases, assistance of legal counsel is usually advisable, as the arbitration procedures are often quite procedurally technical and some evidentiary and legal issues often arise which require legal knowledge.

Arbitration awards are usually based on the facts and the law, but arbitrators also usually have the power to reach a fair or “equitable” result under the facts.

Once an arbitration award is entered by the arbitrator(s), the parties have a very, very short time - days - to request correction of the Award on limited grounds, or to very promptly file a Motion in Court to vacate the Award for certain procedural irregularities. (See related article)

Except for those limited statutory grounds for correction or vacation of an award, it usually cannot be challenged, reversed or appealed even if there is a legal or evidentiary error in the Award. (But see related article).

The award may be confirmed by the Court as a Judgment, and may then be enforced by the Courts, just like any other Court Judgment.