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What Is the Difference Between Mediation and Arbitration?

Whether it’s a disagreement between partners, a dispute with a supplier or one of hundreds of potential contractual issues, most businesses will face legal conflict at some point. The question is how to resolve it as efficiently, favorably and cost-effectively as possible.

While engaging in lengthy (and expensive) litigation is always on the table, Texas law allows, and even encourages, parties to use alternative dispute resolution (ADR) methods to settle their differences. Mediation and arbitration are the two most common forms of ADR, and business owners can benefit by understanding how these methods work.

How mediation works

Mediation is an informal process where parties bring their dispute to a neutral third party, known as a mediator, who facilitates discussions and negotiations to help the parties resolve their differences. The mediator does not issue a binding judgment or decide the issues for the parties; they must reach an agreement themselves. And in some cases, business contracts may require that parties mediate before resorting to litigation.

There are numerous benefits to mediation:

  • Mediators are often retired judges or experienced business attorneys.
  • Mediation is private and confidential with no court record generated.
  • It takes less time than litigation because sessions don’t need to adhere to a court calendar.
  • It is usually less expensive than litigation, and both parties share the costs of the mediator.
  • The mediator can assist parties by helping them understand each other’s positions and by proposing creative solutions that the parties themselves may not realize are available.

Frequently, parties are able to continue their business relationship after mediation because the dispute has been resolved amicably, without a bitter court battle.

What arbitration does

Another common ADR method is arbitration. Like mediation, it takes place out of court, but it can involve more than one impartial third party. Arbitrators, unlike mediators, make decisions, and those decisions can be binding or nonbinding. In Texas, arbitration is a nonbinding forum; however, the arbitrator’s decision can be binding and enforceable if the parties agree beforehand to be bound by it. In binding arbitration, the decision of the arbitrator(s) is final and is extremely difficult to challenge in court.

In both arbitration and mediation, it’s essential to be represented by your own attorney to ensure your interests are being protected.

At the Law Office of Paul R. Clevenger, I draw on more than 30 years of experience to help clients resolve business disputes in the Dallas area through ADR or litigation, using whatever method works best for them. To schedule an initial consultation, call 469-212-9764 or contact my office online.

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