Mediation uses a neutral person to help the parties reach their own agreement through structured and guided discussions, while arbitration uses a neutral decision-maker who hears evidence and argument and determines the outcome, subject to the applicable agreement and rules. Both mediation and arbitration are forms of Alternative Dispute Resolution (ADR), but they give the parties very different levels of control over the results.
One fundamental difference is that an arbitration looks at past events and makes a decision based on that history, while mediation looks forward and lets the parties chart their own future course (such a settlement or trial, or how do we do business again in the future?)
What Is Mediation?
Mediation is a process in which a neutral mediator helps people or businesses discuss a their dispute and work toward a settlement. The mediator makes no decision on the outcome and does not decide who wins. Instead, the parties decide whether or not to settle and what terms they will accept.
Mediation is less formal than court proceedings and may allow the parties to address practical concerns that a court might not be able to resolve.
What Is Arbitration?
Arbitration is a dispute resolution process in which an independent arbitrator or panel of arbitrators reviews the parties’ positions, evidence, and arguments before issuing a decision. A decision in arbitration is called an award. It takes place outside the court system but can resemble a formal legal hearing under relaxed rules of procedure and evidence.
Depending on the arbitration agreement and applicable rules, the decision may be binding or non-binding. Binding means the award is final and cannot be challenged. Non-binding means the parties can choose to accept or reject the award and can be further proceedings.
Mediation vs. Arbitration: Key Differences
| Factor | Mediation | Arbitration |
| Who decides? | The parties | The arbitrator or arbitrators |
| Main purpose | Reach an agreement | Obtain a decision |
| Binding effect | Settlement may result in a binding contract when properly documented | Award may be binding under the agreement and rules |
| Party control | Higher | Lower |
| Formality | Generally less formal | Generally more formal, but less formal than a court trial |
| Process | Facilitated negotiation | Structured hearing |
| Evidence | Is discussed but not presented as in a hearing | More structured but evidence rules are relaxed |
| Privacy | Depends on applicable rules and agreements, legal privilege may exist under the Uniform Mediation Act | Depends on applicable rules and agreements |
| Outcome | Negotiated settlement agreed to by the parties | Arbitration award from the arbitrator(s) |
The main difference is decision-making authority. In mediation, the parties retain control. In arbitration, that authority is given to the arbitrator(s).
How Does Mediation Work?
Choosing a Mediator
The parties select a neutral mediator who can facilitate communication and help keep discussions focused on the dispute. In a court-based mediation, the Court may play a role in mediator selection.
Discussing the Dispute
After an introduction of the people involved and the process to be used, the parties explain their positions and concerns. The mediator may meet with everyone together(a joint session) or hold private meetings (caucuses) with each side.
Negotiating a Settlement
The parties discuss possible solutions and may exchange settlement offers. The mediator helps clarify disagreements, asks analytical questions, might make suggestions, but does not impose an outcome.
Reaching an Agreement
If the parties agree, the terms can be placed in a written settlement agreement. When written and signed by the parties, the agreement can be legally binding depending on the wording of the agreement and applicable law.
How Does Arbitration Work?
Starting the Arbitration
Arbitration can be (1) required by a contract clause in an agreement between the parties, (2) agreed to by the parties, or (3) ordered by a court. The parties select an arbitrator or arbitrators according to the agreement and applicable rules.
Presenting Evidence and Arguments
The parties present relevant evidence, legal arguments, and, when appropriate, witness testimony. The procedure is generally more like an informal hearing than a trial and is not like the business conference nature of a mediation.
Arbitrator’s Decision
After considering the case, the arbitrator or arbitrators issues an award. Whether that award is binding or non-binding depends on the arbitration agreement and applicable rules.
When May Mediation Be a Better Option?
Mediation may be appropriate when both parties are willing to negotiate, want greater control over the outcome, and/or have an ongoing business or personal relationship they want to preserve. It can also be useful when a negotiated solution is realistic because of flexibility and practicality.
When May Arbitration Be a Better Option?
Arbitration may be appropriate when the parties want a neutral decision-maker, a formal determination of the dispute, or a quicker alternative to a court trial. An arbitration clause may also require arbitration in certain technical or scientific disputes.
Mediation vs. Arbitration vs. Litigation
Mediation focuses on guided negotiation and party agreement. Arbitration provides a neutral decision outside the court system. Litigation takes place through the courts, where a judge or jury determines disputed issues under law, rules of evidence, and established court procedures.
Costs, timing, privacy, evidence rules, and available review can vary for all three processes.
How Harold Paddock Supports Civil Mediation
Harold Paddock brings more than 53 years of legal and litigation experience to civil mediation. His background includes service as a Magistrate, Settlement Week Coordinator, Court Mediator, and Senior Magistrate. His mediation experience includes personal injury, wrongful death, contracts, workers’ compensation, land use, eminent domain, consumer sales practices, and business litigation.
Conclusion
Mediation and arbitration are both alternatives to traditional litigation, but they work differently. Mediation gives the parties control over whether and how they settle. Arbitration gives a neutral arbitrator authority to decide the dispute, subject to the applicable agreement and rules. The appropriate process depends on the dispute, the parties’ goals, and the agreements and laws that apply.
Frequently Asked Questions
What is the main difference between mediation and arbitration?
In mediation, the parties decide whether to settle. In arbitration, an arbitrator decides the dispute, subject to the applicable agreement and rules.
Is mediation binding?
Mediation generally does not impose a result. However, a properly documented settlement agreement may become a legally binding contract.
Is arbitration legally binding?
Arbitration may be binding when the arbitration agreement and applicable rules provide for a binding award that cannot be challenged. Some arbitrations can be non-binding.
Which gives parties more control?
Mediation generally gives parties more control because they decide whether to accept a settlement, and if so, on what terms.
Is mediation more informal than arbitration?
Generally, yes. Mediation focuses on facilitated negotiation, while arbitration usually involves a more structured process for presenting evidence and arguments.
Should I choose mediation or arbitration?
The choice depends on the dispute, applicable agreements, willingness to negotiate, desired level of control, and other legal considerations.
This article provides general information about business dispute mediation and is not legal advice. Anyone considering mediating a dispute should consult with an attorney.