Mediation is a form of dispute resolution where the power to resolve the dispute remains with the disputing parties themselves. Mediation is not like arbitration or litigation in that it is non-adversarial: the object is not to win, but to arrive at a mutually acceptable compromise. Mediation is particularly appropriate for valued, on-going relationships. For example, a business may have a dispute with a key supplier, distributor or valued employee.
Mediation is, however, one step removed from unassisted negotiation between the parties themselves. A trained mediator is present to facilitate an agreement by exploring potential resolutions and helping to draft a final, binding contract when the parties reach an agreement. Throughout the process, the mediator remains neutral. Signed agreements reached in mediation are as binding as any other contract. If the parties cannot reach an agreement, they may be forced to pursue arbitration or the courts.
Although mediation clauses are not as common as are arbitration clauses, businesses may want to consider requiring mediation before arbitration. The minimal time invested in the less-formal negotiation and mediation processes may avoid greater legal fees and costs in arbitration or litigation.