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Austin TX Business Law Blog

Monday, January 22, 2018

Business Disputes: Arbitration vs. Mediation

Is arbitration or mediation the best method for resolving my business dispute?

For business owners, disputes are inevitable.  Often, business disputes will arise between business partners or between two businesses when they disagree about the terms of a contract.  A business dispute can cause much stress and have financial implications.  When it comes to resolving your dispute, there are two main options:  arbitration or mediation.  Each dispute resolution process comes with benefits and drawbacks.  Our Austin, Texas business law lawyers review the basics of arbitration and mediation below.

Arbitration

Arbitration involves submitting your business dispute to a selected neutral party who will issue a final and binding decision.  Many business contracts today will call for mandatory arbitration.  An arbitrator will gather evidence related to your dispute and will issue an opinion after a thorough review of the matter.  Arbitration is a formal process during which each party will be able to submit their side.  Unlike mediation, arbitration does not involve negotiation.  Rather, the parties involved in the dispute will argue their position and the arbitrator will make the ultimate decision.

Mediation

Mediation is a dispute resolution method in which a neutral third party, known as the mediator, assists the parties in reaching a business agreement.  In contrast to an arbitrator, a mediator does not have the power to issue a binding decision on the matter.  Rather, the mediator’s role is to help the parties reach their own decision.  Mediation is a private process with no court record.  It is less expensive than a trial, and also typically less costly than arbitration.  However, mediation is not always successful in resolving the matter.  If the parties cannot agree to mediation, arbitration or litigation will often be the necessary next step.

Which is Best?

Arbitration and mediation both have benefits and drawbacks.  The dispute resolution process that is best for you will depend on the nature of your dispute.  Additionally, the contract at issue should be closely reviewed as it may dictate your necessary course of action in the event of a dispute.  Business owners should review the basics of both arbitration and mediation then consult with a business law attorney for individualized assistance with their unique business dispute.


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