The three most common types of dispute resolution are mediation, arbitration, and of course, litigation. Here’s a breakdown of how these processes differ.
Mediation is a type of dispute resolution process that involves a neutral third party, called a mediator, who is responsible for helping both parties reach a consensual resolution. Rather than making a decision on behalf of both parties, the mediator encourages either side to discuss their opinions, voice their arguments, and explore grounds for a potential compromise.
Mediation is a non-binding form of dispute resolution, which means that it’s up to the individual parties to decide if they want to agree to and implement a resolution, not the mediator. Mediation is fully voluntary, and for small disputes, can involve just one meeting to achieve a mutual agreement.
It’s best to select mediation for dispute resolution if the current dilemma is negotiable, such as the costs of repairs found during inspection or similar earnest money disputes. Together with a mediator, you can speak through the best course of action without the input of lawyers or a judge.
Arbitration is a type of dispute resolution process that involves a neutral third party, called an arbitrator, who is responsible for listening to each party’s argument and rendering a verdict. Unlike mediation, where the resolution is non-binding, the arbitrator’s decision is binding. The arbitrator essentially plays the role of a judge, but their decision is often confidential and cannot be appealed.
Many elements of arbitration are flexible, including the arbitrator themselves. The disputing parties may choose their own arbitrator(s), decide if lawyers will be present for the arbitration process, and dictate which standards of evidence are permissible to use in the resolution process.
Because arbitration relies on a third party to reach a decision, it’s best to use it for issues that you cannot come to an agreement on alone, or if mediation has already failed. It’s also wise to select arbitration if the privacy and cost-effectiveness of the resolution process are relevant to you. For example, tax matters related to purchased assets are often better suited for arbitration.
Litigation is the most familiar type of dispute resolution process. It involves the national courts and/or a judge or jury to reach a verdict. The key players in litigation are the plaintiff (the party who filed the legal action) and the defendant (the party who’s accused of some type of wrongdoing).
Like in arbitration, the judge who oversees the case is responsible for considering the evidence and delivering a ruling. Litigation is also a binding type of dispute resolution. However, a major difference between litigation and other types of resolution is that the verdict is public record.
If privacy is top-of-mind for you, litigation may not be the best avenue for dispute resolution. Litigation is best suited for instances in which one party is alleging criminal misconduct on behalf of the other, or if the case involves a variety of complex issues surrounding legality or property rights.