Arbitration versus Mediation

Arbitration and mediation have become more common in recent years. The inclusion of one-sided arbitration clauses in consumer agreements with large businesses has taken away the ability of consumers to obtain legal relief in courts. North Carolina’s requirement that all civil cases in Superior Court be mediated prior to trial has successfully reduced the number of cases going to trial and has shortened the time to conclude these cases.

Arbitration and mediation both involve settlement of disputes but are different in one important way. The arbitration process requires a single arbitrator or a panel of arbitrators to hear evidence from the parties and reach a decision that is enforceable just like a judgment obtained in a trial. On the other hand, mediation is a process in which a neutral third party helps persons or businesses with a disagreement find a voluntary solution.  No party is required to settle their claim and, unlike arbitration, mediation can end with no resolution of the dispute.

Contracts often contain a requirement that arbitration be conducted by the American Arbitration Association. While the AAA is a fine organization, its process can be cumbersome and expensive for many disputes. If the parties can reach an agreement on a mediator, arbitrator, or panel of arbitrators, they do not have to pay the administrative cost of using AAA and can craft their own rules to facilitate the arbitration process.

In most cases it is wise to use an attorney to represent you in arbitration and/or mediation. While the process can be informal, your rights and obligations can be seriously affected by an adverse outcome.