These terms can often be the source of confusion for those unfamiliar with legal jargon. Although similar in many ways, these are all different processes and it’s important to be aware of the crucial differences present between the three.
Per the official online law dictionary, mediation is defined as “the attempt to settle a legal dispute through the active participation of a third party”.
Mediation is the least formal of the group. The big difference between mediation and the other two (litigation and arbitration) is that mediation is non-binding and still allows the parties in question to make the final decision.
A mediator will work with the two parties as a middleman, attempting to resolve any disputes and to reach a conclusion of mutual benefit. The mediator, unlike an arbitrator, will not be the one to decide upon the final outcome. A suggestion can be made by the mediator regarding the optimal outcome, but again, this will be non-binding and the decision will ultimately lie with the parties themselves.
Mediations work well because they allow for quicker resolutions and inherently generate more creative deals than the others. For better or for worse, the control of the situation remains in the hands of the parties involved: this can be good insofar as it maintains a level of awareness and ownership over the outcome. The lack of legal potency held by someone like an arbitrator or a judge, however, means it can sometimes lead to stalemates in the event the parties fail to come to an agreement.
On the spectrum of these three concepts, arbitration lands firmly in the middle between the two. It is similar to mediation: it involves two sides in conflict seeking for resolution. It doesn’t involve a judge, still, but it does center on a person more powerful than a mediator: an arbitrator.
Arbitrators can either be experts within the industry of the dispute or lawyers specifically trained to handle such disputes. Unlike a mediator, the final ruling of the arbitrator must be respected by both parties and they do not have the freedom to simply choose not to comply. The arbitrator will collect evidence from both sides and then come to a ruling, much like a judge, but the process is more streamlined than a typical court hearing would be.
In some cases, two parties will even agree to the usage of a panel of arbitrators. So instead of their being one individual responsible for what can be an impactful decision, there is a team of professionals that converse and eventually reach a decision. The nature of having more people involved can make this a lengthier process, but it can lead to a more fair ruling that ultimately is better for both parties involved.
The Merriam-Webster dictionary defines litigation simply as “the act, process, or practice of settling a dispute in a court of law”.
As the name suggests, litigation is the most “legal” process on this list. It involves taking the disagreement to a judge or jury for a formal, legal resolution. As such, this process is often the most time-consuming of the three, although the rigid framework and set of rules means once a decision is made, there is little room for argumentation.
The legal framework involved here also creates less opportunity for the type of creative resolution one might see in a mediation or an arbitration. When a disagreement is present and the parties involved have not set up a process for immediate mediation/arbitration, litigation is the best course to take.
Another interesting element present is the fact that a bit of special insight is potentially lost by the ruling party. In an arbitration, the person or people chosen to make the decision are often well-versed with the type of business involved or they are trained lawyers with a focus in arbitration. Litigation’s reliance on a judge or a jury means that won’t always be the case.
If you are seeking one of these 3 medians or have had another party bring up using one, we can help! It’s important you understand the difference and use someone that can see clearly and have your interest in mind.