This is part one of a two-part blog series on resolving complex commercial disputes.
Disputes in business can and do arise, but the good news is there are multiple choices available to solve these disputes, and some may be more appropriate than others depending on the situation. While most parties and their lawyers may try starting with simple negotiation to resolve their disputes, if a resolution cannot be reached, it may be time to turn to other legal avenues. In many cases, it may be advisable to first attempt an alternative dispute resolution (ADR) such as mediation or arbitration.
Mediation is often one of the first steps in the resolution process and involves a third party, that is neutral to the situation, to help the two parties in dispute come to an agreed upon resolution on their own. The mediator is not there as a judge for a binding decision but is instead there to ensure that both party’s sides and issues are heard and understood and to create a more cooperative atmosphere to get the dispute solved quickly. One of the primary objectives of the neutral mediator is to help parties understand how a judge is likely to see things, so the final resolution will be acceptable to the courts.
Some parties will prefer mediation to litigation as it can be more costly taking an issue to court. in addition, mediation is generally kept out of the public eye, allowing both parties to continue the business relationship if desired. A large percentage of business disputes can be resolved in the mediation stage. If not, they will proceed to arbitration or litigation.
Most contracts include an arbitration clause, in order to keep disputes out of court, if possible. Arbitration is similar to a mediation in the fact that it uses a neutral third party or parties that act as a judge to resolve the dispute. The parties involved will be able to negotiate each aspect of the arbitration and can choose whether to have lawyers present and what the standards of evidence will be. Arbitration is also similar to a court setting in the fact that each disputant will present their side of the case and the evidence they have, and in the end, the arbitrator will issue a binding decision.
The legal rules for evidence and formal discovery will not apply, as it would during litigation, although both parties are allowed to submit evidence. Arbitration is often preferred when the disputants want a binding agreement and want to forgo the cost of expensive litigation. The arbitration will be kept confidential as well but comes with the drawback of a final decision.
Mediation vs. Arbitration: What Are the Differences?
There are a few primary ways in which mediation and arbitration differ.
- Mediation is a facilitation and negotiation process to get both parties to agree; arbitration is a hearing process which results in a final decision.
- The setting for mediation is informal; arbitration is a formal hearing-like structure.
- Mediation decisions are not binding, whereas an arbitration decision is.
Choosing between mediation and arbitration may depend on the type of dispute you are looking to solve, or the negotiation process that already took place. For many business disputes, mediation will be considered the first step, and if an agreed upon resolution cannot be met, then they will move onto the arbitration or litigation process. Even if you decide on using an alternative dispute resolution, it is still advisable to retain the services of a knowledgeable business attorney. They can help represent you in any type of dispute resolution and advise you on a case for litigation if a resolution cannot be met.