Savvy business owners know that it is always wise to avoid litigation if possible. Litigation can be extremely expensive, not to mention that there is no reason to ruin business relationships if you can avoid doing this. This is why arbitration and mediation are popular alternatives to litigation.
While arbitration and mediation are ways of avoiding litigation, there are some differences between the two. The main difference is that mediation tends to be non-binding while arbitration is binding.
What is mediation?
Mediation involves the feuding parties hiring a neutral mediator to help guide the conversation about whatever the conflict is. The neutral mediator does not side with either party, but, rather, he or she will help both sides express their grievances in a controlled environment.
Mediation is normally non-binding, which means that if one party ends up satisfied with the results of mediation, that party may decide to take the dispute to court.
What is arbitration?
Arbitration looks more like litigation. The parties will hire one arbitrator or a panel of them. These arbitrators act like judges. Often, arbitration can be very helpful for extremely technical matters that need the expertise of somebody in that specific field rather than a regular judge. Arbitration also has the advantage of being much quicker than traditional litigation. While you may need to wait several months for a court to hear your case, arbitration can happen as quickly as you and the other party decide to hire arbitrators.
Arbitration is usually binding, which means that if a party remains unsatisfied they may not take the matter to litigation.