Alternative dispute resolution (ADR) may, in certain circumstances, be a much less expensive way for parties to resolve legal disputes. It can also prove to be a highly efficient and effective solution because, through ADR, both parties have some role in developing the solution. This makes that solution more likely to be honored, keeping clients out of court and allowing them to focus on making their business thrive and grow.
Below we take a closer look at two main types of ADR: arbitration and mediation.
What is arbitration?
In arbitration, parties to a dispute agree to resolve it outside of court. The parties hire a neutral third person, usually a retired or former judge or attorney.
Their agreement determines the rules of how the arbitrator makes their decision. There is no jury and generally no appeal. Each arbitration may be different. Some arbitrators and services have customized rules, discovery protocols, and procedures.
Even if the arbitrator makes a mistake, the parties usually have to accept the arbitrator’s decision. Thereafter, a court will enforce the arbitrator’s judgment the same way it enforces its own judgments. The one exception to this rule is if the parties engage in nonbinding arbitration. Here, the neutral runs the usual arbitration process and offers what the outcome would likely be, but the parties are not required to abide by that decision.
What is mediation?
Mediation allows the parties to negotiate between themselves with the help of an impartial third party. The mediator will facilitate negotiations by asking questions, reframing issues, and helping to pinpoint areas of agreement to forge solutions.
Unlike litigation, mediation is a collaborative process. The goal of mediation is for the parties to devise their own mutually acceptable solutions without resorting to the court system.
What are the key differences between arbitration and mediation?
Businesses often use one of two principal methods of ADR: arbitration or mediation. These methods differ in several ways. In arbitration, an arbitrator listens to arguments from both sides of the dispute and makes a decision based on the evidence presented. In mediation, the mediator helps the parties discuss the dispute and helps them work out a solution but typically does not come to a binding legal decision for the parties.
When should you consider using alternative dispute resolution?
ADR can be effective in a wide variety of circumstances. For example, if you are involved in a legal matter that involves a partnership, shareholder, contract, real estate, construction, or employment-related dispute, arbitration may be a good, cost-effective alternative to litigation.
In business mediation, both parties have some role in developing the solution. This allows business leaders to ensure the resolution of the matter aligns with their strategic interests.
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