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Mediation or Arbitration of Business Disputes

Every Business Faces Litigation, but Successful Businesses Find Ways to Avoid Lengthy and Costly Courtroom Battles

Business owners are quick to learn, sometimes too late, of the expense of litigation and seek alternatives to resolve commercial disputes. The reality is that most civil cases are settled rather than taken all the way to trial, so settlement is actually the usual method of resolving disputes. The problem is how to achieve a settlement with minimal costs and hassles.

Basically, there are 2 types of alternatives available to resolve commercial disputes other than litigation, arbitration and mediation. There is some confusion as to the difference between arbitration and mediation.

Mediation involves an impartial third party who assists the parties to voluntarily settle their differences. Mediation is (1) a non-compulsory procedure in which (2) an impartial, neutral party is invited or accepted by (3) parties to a dispute to help them (4) identify issues of mutual concern and (5) design solutions to these issues (6) which are acceptable to the parties.

For several reasons, mediation is usually preferred over litigation or arbitration as the dispute resolution method of choice. In mediation the parties decide themselves how to resolve their dispute by talking out their differences, with the mediator helping get them past their positions so that the parties real interests can be addressed. Legal rules are relevant, but not dispositive and are but one of many factors to consider along with feelings and the importance of a continued relationship between the parties. Mediation is a consensual process that bears no relationship to litigation or arbitration. The mediator has no real power to resolve a dispute, which can only be resolved through a consensual process.

Mediation can be used to help avoid costly litigation and is an option that should be explored early in the dispute. It is particularly useful in commercial disputes involving complex business issues. Mediation enables parties to exert control to resolve their differences in an informal, confidential collaborative problem-solving atmosphere with the opportunity to focus and resolve the real causes of the conflict.

Arbitration involves a determination by a neutral arbitrator to ascertain who is right and who is wrong. Arbitration is an adversarial process that is similar to litigation, and for this reason it is not generally preferred as an alternative to litigation. Arbitration is similar to litigation, but is should accelerate the decision-making process as long as it is not abused.

Mediation is offered to business owners as an alternative to litigation to resolve disputes. Mediation is not litigation and most business owners are unprepared for it. Mediation is a moderated, structured forum for negotiation through a third party mediator who serves as a facilitator to encourage communication likely to produce a settlement. Mediation is not about fighting with an adversary and convincing a judge (or an arbitrator) that your position is correct.

Mediation discourages aggressive actions and attitudes that present barriers to effective negotiations and agreement.