Comparing arbitration and mediation in business disputes

Arbitration vs Mediation


When your small business faces a dispute, the path to a resolution can seem daunting. Whether over a breach of contract, partnership disagreement or something else, a dispute can be threatening to the success of your company.

As a business owner, it is in your best interests to consider every option to efficiently resolve the dispute. Fortunately for many, going to court is not the only option. Alternative dispute resolution (ADR) techniques can offer a more collaborative, cost-effective way to address a dispute. Two of these techniques, arbitration and mediation, may be suitable options for you to consider.

Pursuing arbitration or mediation in a dispute

In arbitration, the opposing parties designate an impartial individual as the intermediary, or arbitrator. Each party presents their side of the dispute, as well as any witnesses or documents they may have. The arbitrator listens to both sides before ultimately coming to a decision. This decision, like one made by a judge, is typically binding.

An agreed-upon intermediary is also involved in mediation. The neutral mediator aims to facilitate a settlement through a collaborative discussion of issues and possible resolutions. While similar to arbitration, the mediator ultimately lacks the authority to come to a decision. If an agreement is not mutually reached, the dispute may be required to go to court.

Benefits of resolving disputes out of court

Pursuing a resolution out of court may be mandatory in some cases. Business contracts may require arbitration for disputes while North Carolina courts may first require mediation before going to court is possible.

Whatever the case may be, there are several key benefits that can be gained from avoiding litigation, including:

  • Saving money through potentially less time and resources spent
  • Resolving the dispute more efficiently
  • Keeping the contents of the dispute and decision private
  • Having more control over the course of the dispute
  • Choosing and agreeing on a third-party intermediary
  • Retaining some sort of working relationship with the opposing party

Litigation may still be necessary

Of course, going to court may be preferable for some disputes. Litigation involves the consideration of more substantive evidence and the opinions of a judge and potential jury. The dispute resolution method that is right for you will depend entirely on the facts of the dispute, whether one method is mandatory and the preference of both parties.