“Binding mediation” – a hybrid of mediation and arbitration – is catching on as an alternative to a full-blown court trial. In arbitration, a private arbitrator acts as a judge and issues a binding decision. In mediation, a mediator or “go-between” tries to resolve the dispute by working with both sides, but can’t force an outcome. Binding mediation is a combination of the two: A mediator brings the parties together and tries to negotiate a compromise, but if that doesn’t work, the mediator can issue a binding decision.
In some cases, binding mediation can achieve many of the benefits of both mediation and arbitration. Like mediation, it is relatively quick and inexpensive and may help preserve existing relationships between the parties. But it also provides the finality offered by arbitration.
A big advantage of binding mediation is that it tends to promote more good faith, reasonable bargaining than might otherwise be the case. In a traditional mediation, either side can end the mediation at any time without fear of adverse consequences from “tough” negotiating. But in a binding mediation, both sides will want to be on “good behavior” when they negotiate because they know that their credibility and reasonableness will be taken into account by the mediator if he or she ends up having to make a binding decision.