Businesses are increasingly turning to alternative dispute resolution, or ADR, to settle conflicts with vendors, clients, employees, and even business partners. The upside of ADR is that it avoids the time and expense of litigation; in addition, it often allows the two sides to work together to craft a workable solution.
Because many contracts now include ADR provisions, businesses should also understand that not all alternative dispute resolution mechanisms are the same. The two most popular types of ADR—mediation and arbitration—have several important distinctions.
In arbitration, a neutral individual or group of individuals (an arbitration panel) is appointed to resolve the dispute. Arbitration generally proceeds more quickly than court proceedings and, therefore, is often less costly.
Although arbitration generally involves hearings and the submission of documents, it has its own set of rules, which are generally much less formal than official legal proceedings. However, the arbitrator’s decision is generally final and binding on the parties.
During mediation, the job of the neutral third party is to help negotiate a settlement.
Mediation is informal and therefore allows the mediator to propose creative solutions. An estimated 85% of mediations result in a settlement.
Unlike litigation or arbitration, the mediator’s role is to help the parties find common ground and reach a resolution that both sides can agree upon. The mediator is not authorized to make any binding decision regarding the dispute.
How We Can Help
Our business attorneys are skilled in both arbitration and mediation. We can also help you decide which type of ADR will best match your business goals.
Photo courtesy of Taylor Johnson by Flickr.