In one of my business’s contracts, there is a “Mediation and Arbitration” provision, which says that in the event of a dispute, the parties will attend mediation or arbitration instead of going to court.
Are those options faster or less expensive than a lawsuit?
Mediation and arbitration fall into the category of “alternative dispute resolution,” or ADR.
ADR encompasses a variety of methods that can be used by parties to resolve disputes without the need to have a trial.
Mediation and arbitration are two of the most popular methods of ADR, and they are not the same. Parties may prefer ADR for a variety of reasons, not the least of which is cost savings.
Although a significant amount of preparation is required in anticipation of a mediation or arbitration, the overall cost and time commitment of ADR is usually much less than the cost of taking a lawsuit all the way through a trial.
ADR is voluntary, and at virtually any point in a dispute – from the time that the dispute arises through preparation for court trial – the parties can agree to attend an ADR proceeding. In the case of your contract, the parties preemptively agree to submit themselves to ADR if a future dispute arises between them.
Mediation is typically a collaborative mutual effort to achieve a resolution, with a mediator facilitating the conversation, and helping the parties continue to progress toward a resolution that the parties themselves collaborate to reach.
The mediator does not usually render a decision, and instead assists the parties to come together in agreement upon a mutually agreeable solution. Mediation can be binding or non-binding.
Sometimes the parties just need a push in the right direction, other times if the parties agree to be bound to the resolution reached in mediation, they may reduce that resolution to a written and binding agreement.
Arbitration is more similar than mediation to the traditional trial format.
In arbitration, there is an individual who serves in a similar function to the judge or jury in a court of law. That person is the arbitrator. During the arbitration, the parties present evidence, make their arguments, and ultimately the arbitrator renders a decision, just as if a judge had heard the case.
Arbitration is not required to follow the rules of evidence that a court is bound to follow, and it may be less formal and less intimidating of an environment. In some instances, due to the amount of evidence and preparation for complex cases, arbitration may not result in a significant savings over a court trial.
In cases of both mediation and arbitration, the mediator or arbitrator is a neutral third-party, which is selected by the mutual agreement of the parties in the dispute.
Retired judges will often go into business as private mediators or arbitrators. Practicing and retired attorneys may also provide ADR services.
For parties who wish to reduce costs, save time, or are intimidated by the trial process, ADR can be a suitable alternative for resolving disputes.