What Is the Difference Between Arbitration and Mediation?

Two distinct ways of resolving your dispute out of court

By Tim Kelly, J.D. | Reviewed by Canaan Suitt, J.D. | Last updated on July 7, 2023

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The traditional litigation process is time-consuming and costly. Legal disputes can sometimes take years to reach a settlement agreement or final decision in court. Parties seeking a quicker, more cost-effective resolution of their legal dispute now look to an emerging area of the legal industry known as alternative dispute resolution (ADR).

ADR avoids the courtroom altogether, with disputing parties opting to have their issues resolved with the help of a neutral third party. Typically, this neutral party is a retired judge or attorney with experience in ADR protocol and the guiding law.

Two of the most prevalent types of ADR are arbitration and mediation. In arbitration, the neutral party is called an arbitrator; in mediation, they’re called a mediator.

  • An arbitrator’s role is like a judge in court: they hear both parties’ side of the legal issue, consider evidence, and at the end of the proceeding, issue a binding decision (often in writing) that the parties must accept.
  • A mediator’s role is totally different—instead of making decisions on behalf of the parties, a mediator facilitates the parties’ negotiations to arrive at a mutually agreeable resolution of their dispute.

What Are the Benefits of ADR Over Litigation?

Here are some benefits of choosing ADR to resolve a dispute:

  • Eases the burden on the legal system by avoiding litigation altogether
  • Reduces legal fees for parties through fewer court hearings, filing deadlines, and billable hours
  • Focuses on driving compromise through conversation
  • Promotes resolution while encouraging flexible, outside-the-box approaches
  • Minimizes the stress brought on by litigating private matters in family court and keeps things confidential

The main difference between the methods of ADR is that in arbitration, the neutral third party renders a final decision in the case. By contrast, in mediation, the neutral party guides the process and advises throughout, but the disputing parties still retain control over the process and final resolution.

What Types of Legal Disputes Can You Use ADR For?

You can use ADR to resolve many types of legal disputes, including:

  • Family law issues such as divorce, child custody, and parenting plans
  • Real estate, landlord-tenant, and homeowners’ association disputes
  • Business and employment law disputes
  • Contract disputes
  • Other civil disputes

Some mediators and arbitrators have expertise in a particular legal area, such as family law or real estate law. Other mediators and arbitrators are generalists, meaning they handle a wide range of legal issues. Depending on your legal dispute, you may want a mediator with a background in a particular knowledge area. Learn more about how to choose a good mediator for your dispute.

What Is Arbitration?

Arbitration is a form of ADR wherein a neutral third party or parties, known as arbitrators, hear the facts of the case and render decisions. Arbitrators are often retired judges, and with good reason.

Here, the neutral party acts as a private judge to the parties, essentially hearing the evidence and guiding the case through the dispute resolution process before handing down a decision. Unlike mediation, the arbitrator’s decision is typically final.

Arbitrators usually work in panels of three, with each side selecting their own arbitrator before those two arbitrators select a third. Decisions are finalized by a majority vote, and the judges provide written opinions. More often than not, final decisions made during the arbitration process are binding. In contrast, the mediation process is generally non-binding.

What Is Mediation?

The mediation process differs from arbitration because the disputing parties maintain control of the case. The third-party, referred to as the mediator, acts more as a facilitator, driving discussion between the parties to bring compromise and eventually resolution.

Mediation has found success in recent years thanks in part to the process’ friendly, more collaborative environment. With mediation, parties avoid adversarial litigation and are instead encouraged to resolve their differences in a way that can satisfy both parties. In divorce cases, this usually manifests itself through the dividing of marital assets or finalizing a child custody agreement. Additionally, mediation often keeps the decision in the hands of the participants, as opposed to letting a judge decide. Because of this, the mediator role is traditionally filled by a former attorney.

Do I Need a Lawyer for ADR?

It never hurts to have an advocate on your side that is trained in the legal issues affecting your case. However, mediation tends to be a more relaxed environment where the choice to hire attorneys can be left to the parties.

On the other hand, the arbitration process is more formal than mediation and has many of the same traditions of litigation, such as opening and closing arguments. Arbitration requires parties to make arguments that will sway the arbitrators. As such, it is generally an excellent idea to have a lawyer working on your case throughout the arbitration process.

Find an Experienced ADR Attorney

If you are considering mediation or arbitration as an alternative method to resolve your legal dispute, reach out to an alternative dispute resolution attorney in your area for further legal advice and insight into the process.

For more information on ADR, see our alternative dispute resolution overview.

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