Although the arbitration and mediation processes do have similarities in the New Jersey legal system, they also have important differences that carry potentially significant legal consequences for the parties involved. Here, we’ll explore the differences between mediation and arbitration that any party should consider before starting negotiations.
Mediations vs. arbitrations: The similarities
Both mediation and arbitration are forms of alternative dispute resolution intended to resolve issues before they go to trial, which can be costly both financially and time-wise.
The role of the facilitator of such a negotiation — the mediator in the case of mediations and the arbitrator in the case of arbitrations — is to steer both parties into a mutually agreed-upon resolution that is acceptable.
One of the biggest benefits of these types of negotiations, in addition to saving the court system from overload, is that they allow each party to voice his or her interests without all the formality of the court system, which can be difficult for non-lawyers to navigate. The participants, either the facilitators or the disputing parties, do not necessarily need to be attorneys.
Mediations vs. arbitrations: The key differences
The main difference is that mediation is informal whereas arbitration is formal. Accordingly, the results of mediation are nonbinding, meaning that the decision of the mediator carries no legal weight. Either or both disputing parties can choose to ignore the decision of the mediator and pursue whatever legal action they choose.
On the other hand, the ruling of the arbiter is binding. Except under unique circumstances, the resolution offered by the arbiter cannot be appealed.
Arbitrations and mediations are similar proceedings under New Jersey law. However, one is legally binding, and the other is not. Participants should be aware of the benefits and risks of each type before participating in either type of negotiation.