Should I settle disputes with arbitration or mediation?

Alternative dispute resolution (ADR) is becoming an increasingly popular alternative to settling disputes in court, which is often expensive and time-consuming. Unless there is a specific reason why the parties believe court is necessary, it is usually recommended that contracting parties settle their disputes through one or all of the following processes.

Informal negotiation – Whether or not you plan on settling a dispute in court or through ADR, the judge or arbitrator will want to see that the parties have first attempted to reach a solution on their own. Informal negotiation simply means having all interested parties come together to negotiate a settlement, often involving compromise. If this fails, the parties typically proceed to mediation.

Mediation – Mediation is similar to negotiation but involves an impartial third-party mediator who helps the parties work through their issues. Mediation is also more organized, and often proceeds according to a set of rules, such as those of the American Arbitration Association (AAA) or the Judicial Arbitration and Mediation Service (JAMS). The mediator is not a decision-maker and does not issue any sort of binding resolution. Instead, the mediator may make recommendations, which the parties may agree to voluntarily accept. Mediation is often faster and less expensive than arbitration, which is more similar to formal court. However, if mediation fails to reach a resolution, the parties typically proceed to arbitration.

Arbitration – Arbitration, like mediation, proceeds according to a set of predefined rules. However, instead of a mediator, someone called an arbitrator is empowered to make a binding resolution to the dispute. Therefore, an arbitrator is more similar to a judge than a mediator. All parties to the arbitration process must agree beforehand to accept whatever decision the arbitrator reaches. Again, arbitration is normally much faster and less costly than pursuing a claim in court.

Note that mediators and arbitrators are normally attorneys or former judges with years of experience in the fields in which they practice ADR. This allows them to offer valuable insight and skill to help reach fair and reasonable settlements.

Contracts that include ADR clauses often require the parties to start with informal negotiation and then proceed with mediation and eventually arbitration if each fails to produce a resolution.

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