Mediation vs. Arbitration

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I’ve noticed that one of the ways people find my website is through searching for “arbitration.”  To be clear, I’m thrilled that people have the opportunity to find about mediation no matter what search term is used. But I think that it is essential to discuss how radically different arbitration and mediation actually are.

On the scale of self-determination, mediation leaves power it in the hands of participants while arbitration takes more power from participants than even the Courts.

SIMILARITIES

Let’s start where these processes are similar and why they are imagined to be in the same camp:

Both Arbitration and Mediation are considered to be “Alternative Dispute Resolution” (ADR) processes, which means that they each provide an alternative to subjecting a dispute to a legal contest, carried out in a public courtroom.

Arbitration and Mediation each involve hiring a private third party - the arbitrator or mediator - who is ethically required to be free from conflicts of interest, including any stake in the outcome of the case.

This is where the similarities end.


 

Arbitration

Based on argument and making a case.

Parties usually have attorneys that argue the case in front of the arbitrator.

Uses the discovery process, evidence, and witnesses to make law-based determinations.

An arbitrator hears the case - much like a judge - and runs the arbitration with rules that look much like a courtroom.

The arbitrator makes a binding decision that settles the case.

If the parties are unhappy with the arbitrator’s decision, they generally have no appeal.

The cost may be less or more than a court case.

Mediation

Based on negotiation.

Attorneys are optional (and unusual).  Good arguments don’t “win” a case.

Focuses on the facts and perceptions of the situation and the needs and interests of the parties.

A mediator provides information, helps each party clarify their interests, and assists in their negotiation.

The mediator has no power to decide anything for the participants.

If the parties can’t reach a negotiated settlement, every other option is still available.

The cost is much, MUCH less than a court case.

 
 

Despite its long history and repeated legitimization by the US Supreme Court, there are many criticisms of arbitration arising in the public discourse.  These have to do with the way that binding arbitration agreements, which are found in everything from employment contracts to iPhone agreements, force people to give up their rights.  If you have signed a contract with such a clause, you have likely given up the possibility of a public hearing for your dispute.  If your arbitrator doesn’t find in your favor and you think the decision is unfair, you have no recourse.  The awards of private arbitrators tend to be smaller than court and tilted in favor of defendants (who generally have more resources to argue the case).  As has been highlighted in sexual harassment cases lately, the person who brings a complaint may receive financial compensation, but gross injustices may be hidden and buried. 

This criticism of the traditional arbitration process should, in fairness, mention a process called “voluntary, non-binding arbitration,” which changes the dynamic to some extent. Voluntary arbitration is the same as binding arbitration, except that one or both parties can reject the arbitrator’s decision. Why would this be useful? Because sometimes a credible determination by an expert third party (e.g., a retired judge or experienced attorney) will be accepted by the parties as the likely outcome of a court-based lawsuit. This has the chance to save significant time and money if the arbitrator’s award is approved by the parties.

Whether binding or non-binding, the power to make a decision is handed over to the third party - whether it is a judge, jury, or arbitrator. Anytime this is the case, it is human nature to fall into a win/lose mindset. Everything tends to become about convincing the third party to rule in your favor.

Mediation is an alternative, but a very different alternative than arbitration. Because mediators can’t decide the outcome, mediation engages the process of negotiation, which is an equally powerful part of human nature and the human experience. Instead of giving up self-determination, participants are challenged to find solutions that they want AND that the other person/people can live with. A good mediator serves as a negotiation coach for all the parties and also helps to identify additional sources of value that can increase the overall satisfaction with the outcome. The structure of mediation keeps the process simple and inexpensive, but most importantly, it seeks - and sometimes demands - a search for creative solutions that meet enough of everyone’s needs to reach an agreement and move forward.

Most importantly, if people in mediation fail to reach an agreement, they have given up some fees paid to the mediator but nothing else. All options they had before the mediation began are still available to them.

David River