8.5.1 Arbitration (i) A private process where a neutral arbitrator hears evidence and makes a binding decision. (ii) Often faster and less expensive than litigation, but still costly (average costs range from $50,000 to several hundred thousand dollars for complex cases). (iii) T he Federal Arbitration Act (FAA) enforces arbitration agreements in commercial contracts. (iv) Institutions such as the American Arbitration Association (AAA) and the International Chamber of Commerce (ICC) are options to administer arbitration proceedings.
8.5.2 Mediation
(i) A non-binding negotiation process facilitated by a neutral third party.
(ii) Less formal and significantly cheaper than litigation or arbitration.
(iii) Typically costs between $3,000 and $10,000 for a one-day session.
(iv) O ften used in business disputes, employment conflicts, and contract negotiations. (v) May not result in final resolution of dispute if the parties cannot reach an agreement. Businesses should proactively include well-drafted ADR clauses in their contracts to ensure that disputes can be resolved efficiently and in a jurisdiction that best serves their interests. A careful balance between arbitration and mediation provisions can help minimize legal expenses while maintaining enforceability and flexibility.
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