Dispute Resolution: Mediation and Arbitration

Even when it seems like you’ve done everything right, sometimes disputes crop up. Settling them in courts is generally long, messy, and expensive. Alternative dispute resolution methods (ADR), such as mediation or arbitration, are often considered an easier route. In fact, they can be included in agreements as the preferred method of dispute resolution. Whether you’re considering signing a contract with an ADR clause like this, or you’re facing a dispute and you’re looking for alternatives to going to court, here’s an overview on ADR methods to help you move forward.

What Is Mediation?

Mediation is a settlement negotiation aided by a neutral third party, who is chosen by both parties and may be selected in advance. The mediator facilitates negotiations with both sides to reach a compromise that will satisfy the claims of each. The exact method of mediation varies from mediator to mediator, but is always focused on finding the middle ground that will serve both parties and settle a dispute. Mediation discussions are always confidential. Participation in mediation and the agreement to settle a dispute are voluntary. Because it is voluntary, parties to a dispute cannot be forced to agree to a settlement through mediation, although some courts do require parties to a lawsuit to participate in mediation before trial. Unless the parties agree to the essential terms of a settlement at the mediation (and, ideally, put the terms down in writing signed by all parties), the mediation process is non-binding and does not automatically (or always) resolve a dispute.

What Is Arbitration?

Arbitration is a closer substitute to a court trial. Like mediation, arbitration also relies on a neutral party chosen by both sides, however, the arbiter has a wholly different assignment. Simply put, they review the case as presented to them by both parties and then issue a decision as to which side is right. Arbitration can be binding or nonbinding. In the former case, a party cannot appeal the decision, unless they can prove the arbiter was biased towards the opposition. In the latter, either party can disregard the arbiter and litigate.

Arbitration has procedural rules and enforcement provisions that are different from court cases. In the international arena, arbitration decisions are more easily enforced abroad than court judgments, because of certain international treaties. So, if your dispute includes parties, property, or damages outside of the United States, arbitration is preferred. Arbitration is usually governed by the rules established by the arbitration institution and the national or state laws selected in the arbitration agreement or clause in a contract. These laws and procedures interpret and enforce arbitration provisions separately from the contract as a whole.

Be sure that whomever you choose to represent you at an arbitration, or to review and draft an arbitration or mediation clause in a contract you sign, has specialized training in arbitration and mediation in addition to the substantive area of the law.

What Needs to Be Considered Before Using ADR?

Alternate dispute resolutions have many advantages. They’re much faster, cheaper and typically very successful. However, they should be used carefully. Mandatory arbitration in an agreement can effectively rob you of the right to present your case in a court if the agreement states that the arbiter’s decision is binding for both parties. As such, you should carefully consider any such clause in the agreement you sign, especially how arbiters and mediators are appointed.

What Qualifies Arbiters and Mediators?

There is no requirement for a mediator or arbiter to be a legally trained professional such as an attorney. ADR practitioners can be highly experienced and qualified experts in the field in which they offer their services. Likewise, there is no requirement that a mediator or arbiter have specialized training in mediation or arbitration.

Should You Use ADR? Is there an Arbitration Clause in Your Employment Agreement or Business Contract?

ADR can be an essential tool for solving disputes, but before you commit to it or a contract that enumerates this method as the primary resolution tool, you should always consider the above factors and seek expert advice to understand its terms.

Ms. Kazazian is a Certified Mediator (alternative dispute resolution). She is available to mediate employment law and commercial disputes.