What is ADR? Difference between Arbitration and Mediation

What is ADR? Difference between Arbitration and Mediation

Alternative Dispute Resolution, or ADR, is a process in which a neutral third party, known as an arbitrator or a mediator, helps parties to resolve a dispute and helps them get to an agreement. When you are engaged in a dispute that cannot be resolved with mutual understanding, litigation may be an option, and this is where ADR comes into action.

There are lakhs of cases pending in the Courts of the United States. If you file your civil case you probably would have to wait for months or even years, before your case reaches trial. In the interim, you may spend vast sums of money to keep your case alive by gathering evidence and paying an attorney. Because of a huge waste of money and time, several other methods have been developed for resolving civil disputes. These other methods are collectively known as Alternative Dispute Resolution or ADR.

Mediation and Arbitration are the two common forms of alternative dispute resolution. In this, a civil case is resolved without going to trial.

What is Mediation?

In Mediation a neutral third party helps the disputants to agree on their own. The mediator does not impose the solution on the conflicting parties rather they seek to assist the conflicting parties in exploring the interest underlying their positions by working with both the parties together and sometimes separately. A professional mediator tries to bring out a resolution that is voluntary, non-binding, and sustainable.

What is Arbitration?

In arbitration, a neutral third party who serves as a judge is responsible for resolving the dispute. The arbitrator renders a binding decision after listening to the arguments of both parties.

Arbitrator’s decisions are usually confidential, binding, and cannot be appealed. Arbitration is expensive when compared to mediation but less expensive than litigation. Arbitrators can be given authority by the disputants to determine who wins the case and the award, if any, will be. Three types of arbitration are available to the disputants.

  •  Hi-lo arbitration – In this arbitration, the disputants decide the upper and lower limit of the award that the arbitrator will grant to the winning party. 
  • Final-offer arbitration – In this arbitration, the arbitrator is asked to choose one of the two final offers put forth by each disputing party.
  •  Tripartite arbitration – In this arbitration, there are 3 arbitrators, one named by each party and one chosen by both the conflicting parties mutually.

What is med-arb?

An often-overlooked alternative dispute resolution process is a med-arb, a mediation-arbitration hybrid. In med-arb, the disputing parties hire a neutral mediator, and if the mediator is unable to resolve the dispute through mediation, the mediator takes charge of arbitration and then resolves the dispute by arbitration. Click here to find out what is ADR?

Difference between Arbitration and Mediation

The goal of arbitration and mediation is the same to bring out a fair resolution of the issues at hand, still, there are some major differences in the functioning of both kinds of alternative dispute resolution.

The arbitrator hears the argument of both the conflicting parties, considers the evidence, and then makes a binding decision and one that cannot be appealed. Arbitration is like going through the court process as parties still provide testimony and give evidence similar to a trial but is usually less formal.

In mediation, the dispute resolving process is more of a negotiation process with the assistance of a neutral third party. In mediation, parties do not resolve issues, unless all the conflicting parties agree.

Mediators do not issue orders, make determinations, or find faults of either of the parties. Instead, they help the parties reach an agreement by assisting with communications, obtaining relevant information, and developing options.

Arbitration, on the other hand, is generally a more formal and expensive process than mediation. An arbitrator can be a senior lawyer, a retired judge, or a professional such as an engineer or accountant. Find more information on the difference between arbitration and mediation!

To conclude –

ADR is typically cheaper and faster when compared to litigation. As long as communication has not irretrievably broken down between the parties at dispute, ADR should be considered as a more efficient method of resolving a dispute. Arbitration is on a rise for businesses as it maintains confidentiality which preserves the reputation of the business.