What is the Difference Between Arbitration and Mediation?

As a party in a lawsuit, the essential difference between arbitration and mediation boils down to the amount of control you will retain in the ultimate outcome of the case.  While it is not uncommon for people to confuse the two, arbitration and mediation are not interchangeable terms.  In fact, they are quite different in both procedure and result.

Mediation: When you mediate a case, you appear before a mediator who attempts to facilitate a mutually-agreeable settlement of the dispute.  In this situation, no settlement can occur without your consent.  Frequently the mediator is a former judge, or an attorney,  specially trained to conduct mediations, but there is no requirement in the law that a mediator be a licensed attorney.  In fact, many highly-competent mediators are not lawyers at all.

A mediation can take anywhere from an hour to several days to occur, depending upon the complexity of the case.  The evidence and facts of the case may be thoroughly discussed during the mediation process, but according to Texas law, all facts and evidence which are discussed during mediation is kept confidential, even from the judge who presides over the case.  This confidentiality provision is thought to help promote settlement of the dispute because the parties are in a “safe” zone where what they say can’t be used against them later if the case should go to trial.

If the parties reach an agreement during mediation, that agreement can be enforced by the court through an agreed judgment or other disposition which reflects the mediated settlement agreement.  However, without the consent of both parties to settle the dispute on mutually-agreeable terms, the mediation process will not result in a final decision in the case.

Arbitration: When you arbitrate a case, you appear before an arbitrator who will decide the outcome of the case. 

Most often arbitrations occur because the parties have contractually agreed to submit any disputes between them to arbitration even before the dispute arises.  Arbitration agreements are present in many, if not most, employment contracts, credit card agreements and real estate transactions, and both federal and Texas law favor them.  Because of the strong statutory presumption in favor of arbitration, if a party who has contractually agreed to arbitrate a dispute tries to file a case in a regular court of law, the judge is very likely to enforce the agreement and order that the dispute be submitted to an arbitrator for resolution.

An arbitrator is usually a retired judge or an attorney who is specially trained in arbitration.  Because the arbitrator is called upon to make numerous, often complex, legal decisions regarding evidence and the ultimate decision in the case, arbitrators are usually licensed to practice law.  Whether the arbitrator must be a lawyer in any particular arbitration proceeding is determined by the terms of the arbitration agreement.

Arbitration shares some similiarities with an ordinary court proceeding.  A certain amount of pre-trial discovery is usually permitted (but it may be more limited in scope than in an ordinary court case).  The proceedings are similar, in that opening statements are often made, evidence is presented, objected to and cross-examined, and final arguments are generally permitted to sum up the evidence which has been presented to the arbitrator.  The arbitrator makes ruling and decisions just like an ordinary judge would do in a court of law. 

Although an arbitration and a regular court proceeding share commonalities, there are some striking differences between them.  While the taxpayers share the burden of paying for a court system and the salaries of judges and court staff to operate the courts, in arbitration, the parties pay the arbitrator’s fees.  Arbitrators charge hourly rates similar to attorneys, so during the arbitration process, parties will directly pay both their own attorney’s fees and a portion, if not all, of the arbitrator’s fees.  In this respect arbitration can be quite costly to the litigants.  Some arbitration agreements provide that the parties will share the costs of the arbitrator’s fees equally, other agreements provide that only one party will pay the fees.

In jurisdictions with multiple courts, the parties usually cannot decide which judge will hear and try their case.  However, in arbitration, the parties often have some degree of input into which arbitrator will decide their dispute.  The degree of input in choosing an arbitrator is limited by the arbitration agreement, which sometimes provides a mechanism for both parties to select the arbitrator but other times gives just one side the right to choose the arbitrator.

With few exceptions, everything that is said and done in a court of law is a matter of public record.  Any person can go to the courthouse and listen to a trial or read the contents of the official court file.  However, when a case is arbitrated, the evidence, records and rulings generally remain private and outside of public view.

Arbitration is often called “binding arbitration” because the arbitrator’s decision will be binding upon the parties, just as if the case were tried before a judge in a courtroom.  In fact, arbitration is considerably more binding than an actual judicial decision, because unlike the decisions made by trial court judges, arbitrator’s decisions generally cannot be appealed to a higher court.

Bottom Line:  A judge may order parties to mediate a case, but mediation cannot force an ultimate settlement or resolution of the case.  If a case does not settle in mediation, the case will be later decided by a judge or jury in a court of law.  When a case is ordered to arbitration, with very rare exceptions, the decision of the arbitrator will be final and non-appealable.

— Bonnie Sudderth, Judge of the 352nd District Court of Tarrant County, Texas

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