In conversations with clients, it seems that people misuse the terms “mediation” and “arbitration” more than most other legal terms. Although I do not have any empirical data, my educated guess is that many businesses and construction contractors (who did not depend upon advice given by an experienced business attorney) insert “arbitration” clauses into their contracts thinking that they mean “mediation.” Some transactions involving the sale of real estate include an arbitration clause. Countless times, clients involved in a potential lawsuit point to the “arbitration” clause, and are disheartened when I explain to them the arbitration process. Many thought they were avoiding the potential high costs of litigation. These terms are NOT interchangeable and in this blog post I will explain the basic differences between them.
In mediation, an independent third party mediator helps the parties negotiate a resolution. Just like in negotiations, you control the outcome: neither a mediator nor your lawyer can negotiate a resolution without your authorization. A mediator helps facilitate the negotiation, but cannot make decisions or rulings on your case. Our attorneys have extensive experience in mediation. We see mediation as a cost-effective way to reach a settlement agreement and avoid more expensive litigation when initial attempts at negotiation have not been successful. Most importantly, you have some control over the outcome.
Conversely, arbitrations are conducted like regular trials, with a judge-like arbitrator (or multiple arbitrators) making a final decision based upon the evidence presented, and hopefully the law of your jurisdiction. Appeals of an arbitrator’s decision are virtually nonexistent. Because parties choose arbitration to avoid a court trial, the Virginia Supreme Court generally upholds the arbitrator’s award, unless the arbitration process was faulty. In an arbitration, like trial, you have virtually no control over the outcome.
Here is a helpful chart showing the differences and similarities between trials, arbitration and mediation:
Mediation is an excellent alternative to filing a lawsuit or even resolving pending litigation. Arbitration can be an effective alternative way to resolve disputes, however the process is similar to a court trial, just slightly less formal. However, before binding yourself to any form of alternative dispute resolution, consult with your experienced business litigation attorney.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
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