Mediation is Not Arbitration – Here’s What to Know

When comparing mediation vs. arbitration, both processes involve finding a resolution to disputes, and both involve a third party (a neutral mediator or arbitrator). However, the method by which resolution is reached is completely different between the two.

In mediation, the parties mutually select an impartial third-party to help them reach agreement over a disputed issue or issues. The parties try to resolve their differences outside a court or arbitration proceeding. The mediator has no authority to force the parties to come to an agreement and cannot impose his/her version of a good resolution upon the parties; therefore, mediation is non-binding.  The mediator merely attempts to facilitate a settlement between the parties.

Arbitration is a binding alternative to traditional litigation.  In Arbitration, a third-party arbitrator is used to decide disputes between parties. For arbitration to apply, the parties to arbitration must contractually agree to submit their disputes to arbitration. Many of the legal mechanisms are similar in litigation and arbitration, such as discovery and motion practice.  In many instances, arbitration can resolve disputes more quickly than court cases, which can drag on for years. Another advantage is confidentiality. Arbitration proceedings are typically private, whereas court cases are a matter of public record.

The LHBA GL Trust provides standard builder’s contracts that include arbitration language that is intended to help settle disputes between a builder and their clients. There are many advantages for the builder if a claim goes to arbitration:

• AAA arbitration was studied vs traditional litigation, and statewide AAA arbitration decisions for builders have been very fair
• Removes unfair leverage over the builder in court
• Arbitrators are typically knowledgeable about construction disputes and are often more reasonable than a jury in their awards
• The LHBA GL Trust applies a $1,000 retention if arbitration provisions are included in the builder’s contract and the matter goes to arbitration vs. $7,500 retention if there are no such provisions.

Arbitration can be a very successful tool in dispute resolution. The LHBA GL Trust works with builders in order to get the best possible outcome, and utilizing arbitration has proven to be very valuable in the builder’s “toolbox.”