Commercial & Business Mediation, Arbitration & Settlements

Alternatives to Litigation: Mediation, Arbitration, and Settlements

Resolving a dispute in court is not the only method available to you for working out a business disagreement. Using alternative methods of conflict resolution to reach — or attempt to reach — a settlement with the opposing party may be the best course of action, depending on the circumstances. Mediation, arbitration, and proposing a settlement are alternatives that you and your attorney should consider when deciding how to resolve your lawsuit.

Business Mediation vs. Arbitration

Mediation is a voluntary process where an objective third party, the mediator, facilitates parties’ agreement to a compromise. The agreement in mediation is voluntary and is typically not enforced by a court judgment but is contractual in nature. The parties to a lawsuit can also agree to resolve their dispute using arbitration. In arbitration, an objective third party, often presented in the form of a tribunal, considers the claims in a lawsuit and determines an outcome.

Pros & Cons of Business Arbitration

Arbitrations are often less costly and less time consuming than litigation since arbitrations include fewer procedural hurdles and may have a less exhaustive discovery process. Unlike most judges, arbitration panels often include subject-matter experts who are very knowledgeable on underlying technical issues surrounding a business dispute. Judgments in arbitration are binding and, if not managed correctly, arbitrations can be expensive. Other disadvantages include very limited possibilities of appeal, the lack of precedent, often no explanation for the reasoning behind the award, and the tendency for arbitrators to “split the baby” and always award something (if not fully half).

Determining the Best Form of Business Dispute Resolution

Last, a seasoned attorney might be in the best position to determine when the cost of conducting discovery and preparing for trial outweigh the benefit of a favorable court judgment. In this case, settlement would probably be his recommendation. A knowledgeable attorney, especially one whom you trust and who has worked with you in the past and knows the economics of your business, will often calculate the pros and cons of pursuing litigation and analyze with you whether it makes economic and business sense to settle the lawsuit out of court before going to trial. The more comfortable you are communicating with your attorney and the more your attorney understands your business, the easier it will be for him or her to advise you about what form of dispute resolution — mediation, arbitration, litigation or settlement –might best satisfy your needs under your set of circumstances.


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