Is Mediation a Better Option than Arbitration?

Often when businesses or professionals are involved in a dispute, they face the option of submitting to alternative dispute resolution (ADR) rather than pursuing litigation. There are two different forms of ADR, mediation and arbitration. Many people wonder which is best, and since mediation is less formal, ponder if that is a better option than arbitration. The answer is that in every situation you should speak with a business dispute attorney to discuss which option is best for you. With that being said, there are reasons why mediation is often the form of ADR that works best, especially in business disputes. To understand why mediation may be preferred, it is first important to understand how mediation and arbitration work.

How Mediation Works

In mediation, all parties come to the table in good faith to attempt to work out a solution they can agree upon. In order to keep the mediation on track and focused on the issues in question, there is a third party, called a neutral, that is in charge of facilitating the meeting. However, although they are able to encourage and help the parties to negotiate, if the parties fail to reach an agreement, the neutral does not have the authority to issue an order. The parties do not lose any right to a jury trial by mediating. Mediation may be entered into voluntarily, it may be mandated in an agreement between the parties, or the parties may be ordered to mediate by a judge. There is no requirement to actually come to an agreement.

How Arbitration Works

Arbitration is a more formal process wherein the parties each have an opportunity to present their version of what happened to the arbitrator (or in some cases, arbitrators). The parties usually have a say in who the arbitrator will be. Once the arbitrator has heard from both parties, they render a decision. In most cases, this decision is considered to be final.

Arbitration is often stipulated in a contract that was previously entered into by the parties. It is a process that moves forward more swiftly than litigation. Typically, if a party demands a trial while arbitration is proceeding, as long as that demand is made by a specified cut-off date, any ruling that comes from the arbitration will not be binding on the parties.

Why Mediation Is Often the Best Form of ADR

Mediation is, in many circumstances, the preferred form of ADR for people and businesses involved in a dispute. Following are the reasons why.

Nothing to Lose

In most cases involving arbitration, the arbitrator acts as a judge and any decision rendered by the arbitrator is considered to be final and binding on the parties. By submitting your dispute to an arbitrator, you are saying that you agree to abide by whatever decision they render. In mediation, however, the parties do not have to agree to anything. They still hold in their power the ability to have a final say-so in whatever agreement is entered into, if an agreement is entered into at all. Also, if the parties are unable to reach an agreement through mediation, they have not forfeited any of their rights to proceed to litigation. Knowing that they basically have nothing to lose makes mediation a very attractive choice for many professionals involved in business-related disputes.

Standards Used

Different standards are used to determine the outcome in arbitration and mediation. In arbitration, the parties are required to present their case as they would in a court of law and show why they should prevail under governing laws, rules and regulations. Statutes and court cases are utilized by each party's attorney to bolster their arguments and case for winning. Arbitrators act as judges and in deciding who should prevail in any aspect of the dispute they will follow legal precedent. It does not matter to an arbitrator that a party is not happy with their determination.

Mediation does not use legal precedent to decide who a dispute should be decided in favor of. While either party may use the law, rules, and regulations as a reason why they should prevail, any decision reached by the parties does not have to be based on these legal standards. The agreement reached by the parties is based on what they desire to do, and are willing to do, to settle the disagreement. What matters to the parties is the driving factor behind agreements reached in mediation.

Saving Time & Money

The cost of mediation is significantly less than the cost of a trial and significantly more expeditious than arbitration. Arbitration, while less time-consuming and costly than a trial, is in many ways a shortened version of a real trial. Each party will have their attorney present evidence and “try” the case. The arbitrator can then take their time reviewing what was presented during arbitration before issuing a ruling. Mediation, on the other hand, can be held as soon as all parties are able to schedule a day to meet. If the parties are able to reach a solution agreeable to them, the matter can be resolved that very day. The formal processes of discovery and evidence are not needed.

While arbitration is cheaper than litigation, mediation is even less expensive than arbitration. Each party will most likely have an attorney retained to represent them during arbitration. An attorney typically bills by the hour, and the hours can quickly accumulate. On top of this, the parties will be responsible for paying the arbitrator, or arbitrators, who also typically bill by the hour. In many cases involving mediation, the parties will each pay a portion of the cost of the mediator as well as their own attorney. However, because mediation is not as formal, it generally does not take as much time, saving all parties financial resources.

Control

In arbitration, the dispute is heard by one or more arbitrators and a ruling that is binding on all parties is issued. In other words, the parties have very little control over the outcome of the case. In most cases, the final ruling that is issued cannot be appealed. When participating in mediation, you can, at any point, choose to stop the process or refuse to enter into a proposed agreement. The parties are working together towards a mutually beneficial goal, and they do not subject themselves to a binding decision. The mediator is not acting as a judge and will not issue a ruling, binding or otherwise. It is the ability to retain control over what happens and the ability to have input in the process that attracts many professionals to mediation over arbitration.

Relationship Preservation

Many parties involved in disputes have an ongoing business relationship with one another that they would rather not destroy. Arbitration, by its very nature, is an antagonistic proceeding that wrecks professional and private relationships. Arbitration is conducted in a way that is very similar to a trial where the goal is to show how the other side is wrong and you are right (in extremely simple terms). Things are said and tactics are used by parties and their Atlanta business dispute attorney that can cause resentment, rancor, and feelings of hostility between the parties that last for years. It is very difficult for a business relationship to survive the acerbity brought on by arbitration.

Mediation works in a totally different way, and it is possible to have a successful mediation without once casting aspersions or blame on the other party. Instead, by concentrating on the future it is very possible to retain goodwill and continue business relations after resolving a business dispute through mediation. Both parties are able to come out of mediation with an appearance of being reasonable, fair-minded, and sensible. These are all positive attributes that can go a long way to not only continuing, but also improving, an already existing business relationship. An attorney can discuss with you possible resolutions to your dispute that will actually help, rather than harm, your business dealings.

Reasons to Retain an Attorney for ADR

If you are facing arbitration or mediation, it is in your best interest to have a business dispute attorney by your side throughout the process. They are able to assist you in the following ways.

Offering a Different Point of View

Being involved in a dispute it is often difficult to see the big picture. By retaining a lawyer, you will have your own advocate that is able to look at the circumstances of your situation and offer real, valuable advice as to what options are available to you. Together you can formulate a game plan and develop a strategy for success in ADR.

Knowing What to Expect

While you may know the ins and outs of your industry, it is safe to say you are probably unfamiliar with the different forms of ADR, how they work, and what you can do to prepare for the ADR proceeding. A business dispute attorney can help you prepare yourself and your case to be successful in ADR. This is especially true in arbitration which is very similar to a trial proceeding.

They Know the Law

While it may feel like ADR is not as serious a matter as litigation, binding rulings are issued in at least one form of ADR, arbitration. Because of this, it is important to have counsel that understands the laws in your local area and state, and how to interpret and utilize those laws to bolster your arguments in ADR.

During mediation, a lawyer can advise you on the legal consequences of entering into a certain agreement. While a proposed settlement agreement may sound good initially, there may be legal consequences you are not aware of that an attorney will be familiar with and can advise you accordingly.

Who Can Act As Neutral In Mediation

While the state of Georgia does not offer a real certification for neutrals, the Georgia Office of Dispute Resolution (GODR) does have a program where a neutral may register after completing certain qualifications. Neutrals are required to fill out documentation regarding their criminal history, and periodic background checks may be run throughout the term they are registered. A neutral that is registered with GODR is required to complete 3 hours of continuing education per year.

To serve as a neutral in certain cases, there may be other requirements which must be met. When deciding who to choose as a neutral for your mediation, your attorney is an invaluable resource. They will know who is most qualified and who is the best choice for your particular case. The other parties to the mediation will need to agree as to who the mediator should be. Choosing someone that is knowledgeable in your industry and has a solid reputation for being fair is typically the best choice for all involved.