I often hear the words “mediation” and “arbitration” used interchangeably. That is certainly understandable. They are both types of alternative dispute resolution, and they are both intended to help people resolve disputes more quickly and efficiently than lawsuits.
There are, however, meaningful differences between them. It is important to know these differences because mediation and arbitration clauses are commonly found in contracts. This post focuses on one of the differences – the role of the neutral third party.
“Mediation” is defined by KRS 446.010(52) as “a nonadversarial process in which a neutral third party encourages and helps disputing parties reach a mutually acceptable agreement. Recommendations by mediators are not binding on the parties unless the parties enter into a settlement agreement incorporating the recommendations.” In other words, the mediator is there to help the parties resolve the dispute on their own terms. The mediator does not make rulings or force the parties to settle.
Like mediations, arbitrations involve a neutral third party, who, not surprisingly, is called the arbitrator. Unlike mediators, an arbitrator does make rulings, and the arbitrator’s rulings are binding. In this way, the arbitrator plays a role similar to that of a judge or a jury.
There are other differences between mediations and arbitrations and how they can be used effectively to resolve disputes. If you have questions about mediation, arbitration, or other forms of alternative dispute resolution, contact Loghry Law, PLLC.