What does it mean to resolve disputes with arbitration and mediation? I understand that they're alternatives to going to court, but how can companies or individuals enforce this with contracts? What I mean is, if it's always a cheaper and faster than going to court, why would someone not want? Also it's my understanding it's unenforceable to have a person not go to court e.g. a term is invalid if it says a party can't go to court, so how can companies like IBM force it's employees to agree to arbitration? Is it to dissuade them from a full process in the sense they have to go to arbitration before going to court?
The first method of dispute resolution is called negotiation. This is a technique where the parties involved follow a process known as talking to each other to see if they can agree on a resolution. What makes this enforceable is a thing called goodwill.
If they cannot agree or if there is insufficient goodwill people can (in some circumstances) ask a court to decide. This decision is enforceable by a mechanism known as the law.
As an alternative the parties can agree to mediation and/or arbitration; hence the name alternative dispute resolution (ADR). They can either do this after the dispute arises or before by writing it into the contract. In either case a court will enforce the outcome because it is part of the contract. It is also possible for a court to order mediation before it will hear the case; this is particularly true in family law disputes.
Mediation is a step up from negotiation where a third party facilitates the negotiation but is not an active participant in it. The mediator's job is to create the conditions where the parties, who may have an acrimonious relationship, can start to talk to one another.
Arbitration is carried out according to rules that have legislative force, in Australia this is the Commonwealth Arbitration Act. The arbitrator(s) (usually 1 or 3) hear the evidence of each party and make a decision.
Other types of ADR include conciliation and statutory mechanisms like tribunals or adjudicators, usually on an industry basis. The statutory mechanisms may be mandated alternatives or run in parallel to court.
What I mean is, if it's always a cheaper and faster than going to court, why would someone not want?
Nothing is always cheaper and faster, complex arbitration can approach the cost of complex litigation. Mediation would almost always be cheaper but it is not guaranteed to get a result. Mediation is unlikely to work if the animosity is so great that the parties cannot be in the same room without violence for example.
Additionally, these are private methods of resolving a dispute and do not set (or necessarily follow) legal precedents. There may be circumstances where one or more parties when the decision public and binding on other parties; environmental and human rights groups spring to mind.
Also, people in disputes do not always act rationally.
Also it's my understanding it's unenforceable to have a person not go to court e.g. a term is invalid if it says a party can't go to court, so how can companies like IBM force it's employees to agree to arbitration?
True, but they can require them to use ADR first; if the arbitration has been done properly a court would not overturn it. They also can't force anyone to agree to anything; people always have the option of not taking the job.
Dale's response is very thorough. I would just add that while mediation may not produce a result and is not considered binding, arbitration often produces a legally binding result. Furthermore, pursuant to the New York Convention, most countries have agreed to uphold the arbitrator's decision, so long as the proceeding was conducted by a recognized tribunal. This is especially important in international disputes, as it prevents a foreign party from resisting compliance with the ruling, since the prevailing party can seek to have the result enforced in such foreign party's home country.