How are mediation and arbitration different?

There are many reasons for savvy small business owners to avoid litigation. Litigation is often extremely time-consuming and very expensive. Plus, going through with litigation can cost you valuable business connections.

However, a level of dispute is inevitable in business. If you are dealing with a business dispute, you may wish to pursue an alternative means of dealing with it like mediation or arbitration. Both of these options are valid alternatives to litigation, but there are some marked differences between them.

What is mediation?

Mediation is a non-binding process, which means that if one or the other party is unhappy with the result you may still end up in court. Typically, this happens with a single neutral mediator. The role of the mediator is to guide the conversation between the feuding parties.

The idea behind mediation is not for the mediator to present a judgment. Rather, mediation focuses on getting the feuding parties to come to an agreeable resolution on their own.

What is arbitration?

Arbitration is typically binding. In fact, in some cases, it may be more difficult to reverse the results of arbitration than it is to appeal the decision of a judge. Arbitration replaces the trial process with multiple chosen people. Usually, there are three: each party will nominate one arbitrator, and then those two arbitrators nominate a third. These persons then listen to both sides of the dispute, much like an actual judge, and then render a verdict.

In many cases, mediation and arbitration are much quicker and cheaper than traditional litigation. What is right for you depends on the nature of your dispute.