Avoid litigation with alternative dispute resolution
Arbitration and mediation are two ways to avoid going to court—and they can save you a bundle of money.
Few, if any, business owners want to take a dispute to court. Lawsuits are expensive, time consuming and create stress. Fortunately, there are other paths to settling problems. Sometimes called “alternative dispute resolution” or ADR, arbitration and mediation are effective ways to avoid taking a conflict to court.
What’s the difference between arbitration and mediation?
When your dispute is settled by an arbitrator, his or her decision is binding; both parties must abide by it. In mediation, both parties decide whether or not to agree to a settlement.
There’s a difference in process, too.
Arbitration is similar to the court process in that both parties provide testimony and evidence. Before the process begins, both parties agree that the final decision is in the hands of the arbitrator, essentially making the arbitrator a judge.
In mediation, a neutral third party acts as negotiator between the disputing parties. There is only a settlement when both sides agree. There is typically some back and forth as the mediator meets with both parties, together and individually. If the parties don’t agree, a lawsuit is possible.
In both methods of ADR, the process is confidential unlike a court case where proceedings become part of the public record.
When do mediation and arbitration happen?
Sometimes, a clause is written in to a contract that states if a dispute arises, it will be settled through arbitration.
If there is no contract with an arbitration clause, the disputing parties can voluntarily agree to arbitration or mediation. Parties may also agree to arbitration if mediation fails.
During a lawsuit, a judge may order disputing parties to go to mediation.
If you have a contract with an arbitration or mediation clause, it should spell out who pays. Often costs are split but keep in mind expenses are not limited to the dispute resolution process.
In a mediated case it can be wise to seek counsel before you enter mediation so you understand the legal issues you face.
With arbitration, typically each side will pay for their own lawyer and witness costs, and split the cost of arbitration.
Who can mediate and arbitrate?
While the American Arbitration Association maintains a roster of impartial third parties who encourage disputing parties to craft a solution of their own, many people can serve as a mediator. This includes judges and leaders in the legal and business community.
When choosing a mediator, ask questions about their experience and clients they have worked with in the past. Use this mediation checklist from Harvard to interview mediator candidates.
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