When you have a dispute with either a business partner or an employee, or a customer, you can hope that it resolves quickly and without complication. However, a serious dispute almost always arises to a level where standard, face-to-face resolution becomes impossible. But that doesn’t mean you don’t have any choices left.
Arbitration vs. mediation vs. litigation, which is the right choice?
When initial negotiations fail, you generally find yourself looking at three primary resolution methods:
- Litigation: The decisions are made by a judge after both sides formally present facts. Decisions carry legal weight and are final. It can take some time to get a court date and can be costly.
- Arbitration: The decisions are made by a neutral third party called an arbitrator. Parties may seek binding arbitration, meaning both parties will follow the arbitrator’s ruling. It is significantly faster and less expensive than traditional courts.
- Mediation: Recommendations are made by a neutral third party called a mediator. The recommendations are not final or binding. It is much faster and less expensive than litigation.
If your concerns are all about time and money in the dispute resolution of your issue, then mediation and arbitration may be the right choices for you. However, you must understand the important differences in those types of solutions.
The key difference between arbitration and mediation
We already mentioned that the decision for arbitration could be binding, whereas mediation is not binding. And while the possibility of binding arbitration is a good thing, it can be difficult to agree to an arbitration resolution once a dispute has already gotten out of hand. Often arbitration conditions are set in a contract, so it’s possible to include them in a partnership agreement or employment contract.
However, some view arbitrators as beholden to the person who chooses them. This makes parties reluctant to turn to binding arbitration once a dispute has gone on long enough. In those cases, it’s still possible to achieve a good result using mediation, which does not carry those same stigmas.