Alternative dispute resolution: mediation or arbitration?

Litigation can be expensive. Courts in Minnesota and throughout the nation are busy and crowded dockets can mean months or years before you may obtain a hearing. Litigation can also be extraordinarily complex and time-consuming, which adds to its costs. It is always something of a risk, as you are turning over the final decision-making authority in your case to a judge or jury. If the result is unfavorable, you are left with the choice of accepting it or the more expensive option of determining if an appeal is possible and if success is likely.

Alternative dispute resolution can provide a more cost-effective option. In your contracts or agreements, you can consent to resolve your dispute in a variety of ways, with mediation or arbitration being the most popular options. Before you commit, you should understand the differences between the two methods.

Mediation may be the most attractive, as it can provide the parties the greatest degree of control when developing solutions. With mediation, a mediator or neutral guides the parties through the areas of dispute, helping to explain each side’s perspective. The neutral is not a judge and does not have any authority to impose conditions or a settlement on the parties. They must both agree on the final substance of the agreement for the matter to be resolved.

A disadvantage of mediation is that if the matter is not resolved, the parties may be forced into litigation, which adds to the cost of the entire process. If one side is particularly contentious, it may be more cost effective to choose arbitration or to proceed directly to litigation.

In arbitration, the parties agree to submit to the solution crafted by the arbitrator or panel of arbitrators. Because of the authority to decide the issue vested with the arbitrator, the risk is similar to litigation, but the rules and procedure can be as formal or informal as the parties’ wish, which can help to speed a final resolution to the matter and control costs.

If you plan to incorporate one of these methods in any agreement, you should carefully discuss the matter with your attorney to ensure that you choose the method best suited to your facts and any potential conflict that could arise.