Are Mediation and Arbitration a Viable Alternative for Business?

Save money on legal fees with these alternatives to litigation.

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by Anne Lane

Legal disputes can drain valuable time and money from a small business. If you can't settle a legal problem by yourself, you should consider mediation or arbitration as alternatives to going to court. Mediation and arbitration involve an impartial third party in settling the dispute. Although you can save time and money this way, there are disadvantages as well. You may end up in court anyway or you may be dissatisfied with the way your mediator or arbitrator handles the problem. Here are some things you should consider in deciding whether to try mediation or arbitration:

Mediation and arbitration are alternatives to going to court. Sometimes they are referred to as ADR, "alternative dispute resolution". Mediation is where the parties to the dispute and an impartial mediator work together to determine a way to resolve the problem. The mediator serves the role of a facilitator who helps the parties work together to come to a resolution they can both live with. The mediator makes suggestions but does not make the ultimate decision as to how to solve the dispute.

Arbitration differs from mediation in some important ways. In arbitration each party presents his or her position to an impartial arbitrator. The arbitrator then decides how to resolve the dispute and issues an order that is binding on the parties. The arbitrator serves the function of listening to both sides and then ordering a resolution that is fair.

Both mediation and arbitration have their pros and cons. In mediation, the parties work to come to a solution that is mutually acceptable. This process would allow both parties to have a high degree of satisfaction with the result. However, since the mediator has no authority to make decisions, if the parties can't agree on anything, they may end up in court anyway. You should consider mediation as an option in resolving a business dispute if you think that you can work with the other party to come up with a mutually acceptable solution. If you want or expect your business relationship with the other party to continue after this dispute, you should consider mediation as well.

Arbitration is a more suitable alternative where the parties have already tried to work together and can't seem to come to a mutually agreeable resolution. You will still avoid the cost involved with litigation and your dispute will be resolved quicker than it would if you went to court. However, an arbitrator will not necessarily follow the rule of law when coming up with the resolution to the dispute. What seems fair to the arbitrator may not be the same as what a court would decide. If this is a concern for you, insist that your arbitrator follow legal precedent. You can also select an arbitrator who has experience in your field or in resolving the type of dispute that you have. You can get an idea from the arbitrator's orders in previous cases about what that particular arbitrator might do. You may also benefit from having someone who really understands any special issues that are unique in your industry that a judge or jury may not be aware of.

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