The Difference Between Mediation & Arbitration

 By David Allen

Many people use the terms “mediation” and “arbitration” interchangeably, mistakenly believing the two words have the same meaning. While the English language is curiously replete with examples of different words with the same meaning (e.g., car and automobile), the words mediation and arbitration are not synonymous.

The confusion is possibly caused by the concepts of the two words often appearing in the same contractual provision and maybe even in the same sentence. Adding to the confusion is that the vast majority of individuals who function as mediator also function as arbitrators.

Mediation is a settlement conference presided over by a mediator, who will attempt to the get the parties to come to a negotiated settlement to resolve a dispute. A mediator will use the power of persuasion to steer a settlement by encouraging one side to give more than they think they should have to give, while simultaneously encouraging the other side to take less than they think they are entitled to receive. While engaged in mediation, a party cannot be forced to settle by the mediator. By participating in the mediation process, a party does not give up their right to proceed with arbitration or trial if a settlement cannot be reached.

Arbitration basically serves as a substitute for a trial. The arbitrator is the “judge” who will listen to the testimony, review the evidence and ultimately render a decision which is equal to a judgment received in a court proceeding. The use of the arbitration process, rather than the judicial system, is oftentimes required by the terms of a contract entered into by the parties such as a listing agreement, purchase agreement, or employment contract. The terms of the contract will also usually specify the number of arbitrators, the rules and procedures that will apply to the arbitration and the circumstances, if any, under which the parties may opt out of arbitration.

While there is a general belief that arbitration proceedings are both quicker and less costly than judicial proceedings, which is not always the case. One big distinction does exist; except under very limited circumstances which seldom arise, an arbitration award is final and is not subject to reversal upon an appeal.   On the other hand, the right of a party dissatisfied with a judgment rendered by a judge or jury always has the right to appeal the judgment to an appellate court.

David Allen, a partner in the Phoenix law firm of Jaburg & Wilk, has been representing clients in both transactional and litigation real estate and business related matters for over thirty years.  He is licensed as an attorney in both Arizona and California, and is also a licensed Arizona real estate broker.  He can be reached at 602.248.1082 or at dla@jaburgwilk.com.

This article is not intended to provide legal advice and only relates to Arizona law.  It does not consider the scope of laws in states other than Arizona.  Always consult an attorney for legal advice for your particular situation.