The distinctions between mediation and arbitration in the public’s mind are often blurred. Both are forms of Alternative Dispute Resolution (ADR) that are designed to keep disputants out of Court or to remove them from protracted legal wrangling when already in Court. The two methodologies are distinctly different. This article will discuss, in very general terms the differences between the two.
Mediation involves using an independent third party who helps both sides to come to an agreement. In some instances, there are co-mediators who work as a team to resolve the problem. Mediation is a very flexible process that can be used to settle disputes. It is used in a whole range of situations such as:
• Consumer/small claims disputes
• contract/commercial disputes
• housing disputes
• neighborhood disputes
• family law/ divorce disputes
• personal injury cases
The role of the mediator is to help parties reach a solution to their problem that both parties are happy to accept. The mediator remains neutral throughout the process.
Mediation is voluntary. No one can force you to mediate, although it can be a required step in a larger resolution process. If you don’t like it, you can decline it. If you don’t like the way things are going in mediation, you can simply stand up and walk out. It is particularly effective and an appropriate choice if a party wants to settle a dispute, quickly and confidentially.
It is confidential. What is said by each side is not disclosed to any party outside the mediation hearing. And, each party can disclose confidential facts to the mediator who must maintain that confidentiality. If parties are unable to reach agreement, they can still go to court. Mediation details will not be disclosed or used at a court hearing.
Usually, both parties share the cost of mediation. The cost depends on the value and complexity of the claim, and is the result of an hourly fee charged by the mediator(s).
Mediation can be quicker, less stressful and cheaper than going to arbitration or court. The outcome of mediation can often include elements that are not traditional remedies such as – an apology, an explanation, or something that a court could not order. Once a settlement has been reached a settlement agreement can be drawn up.
The idea of mediation is simple: if two “sides” are both willing to engage in at least some compromise, with the help of a skilled mediator they might be able to find an acceptable common ground for settlement that they could not accomplish without a neutral third party.
While mediations can take any format, by far the most common format is this:
1. The parties are usually asked to sign an agreement with the mediator that says everything said in mediation will be held confidential, and provides for which side(s) will be paying the mediator fees.
2. The mediator usually asks the parties to prepare a confidential mediation statement that outlines their cases (or defenses), their support for their cases, and their goals.
3. Both sides, their attorneys, and the mediator meet together in one room (typically called a “conference”). Both sides are given an opportunity to make a statement in the presence of all parties
4. In many cases, the disputants are separated and each has some time to spend alone with the mediator (typically called a “caucus”), who then engages in a form of shuttle diplomacy, emphasizing to each side the problems with their arguments, the strengths of the other side’s arguments, and the difficulties to be faced if mediation is not successful, and litigation ensues.
5. If the parties achieve resolution, a settlement agreement will be drafted, and signed, before the disputants leave.
There are several advantages to mediation:
* By its very nature, mediation helps both sides understand the other’s viewpoint.
* There can be a significant savings in legal fees for both sides.
* Mediations are confidential.
There are disadvantages to engaging in mediation, but they are few:
* Any time you spend with your attorney, if he/she participates in the mediation, will cost you money.
* You may have to share in the fees of the mediator
Arbitration is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the “arbitrators”, “arbiters” or “arbitral tribunal”); by whose decision (the “award”) they agree to be bound. It is a form of binding dispute resolution, equivalent to litigation in the courts, and entirely distinct from the various forms of non-binding dispute resolution, such as negotiation, mediation, or non-binding determinations by experts. Arbitration is today most commonly used for the resolution of commercial disputes. It is widely used in international commercial transactions.
In arbitration a third party or parties consider both sides in a dispute, and make decisions that resolve the dispute. The arbitrator may be a lawyer, an engineer, accountant, or other expert depending upon the nature and complexity of the claim. The arbitrator is impartial; this means he or she does not take sides. In most cases the arbitrator’s decision is legally binding on both sides, so it is not possible to go to court if you are unhappy with the decision.
Most types of arbitration have the following in common:
• Both parties must be willing to use the process
• It is private
• The decision is made by a third party, not the people involved
• The arbitrator often decides on the basis of written information
• If there is a hearing, it is likely to be less formal than court
• The process is final and legally binding
• There are limited grounds for challenging the decision
Arbitration is used widely for international disputes, disputes between major corporations, employment rights disputes, and consumer disputes. Arbitration is defined, and the rules set out according to laws set forth in the many countries where it is used. Some International organizations have adopted their own processes and procedures.
The typical method for invoking arbitration is the inclusion of language requiring it in a contract between two or more parties. A clause stating that arbitration will be used to resolve any dispute between the parties is included in the contract. This will be agreed at the time the contract is signed, and the clause is intended to prevent expensive and time-consuming disputes ending up in court. If you sign a contract with an arbitration clause, it is usually binding – you can’t change your mind later. And arbitration is also binding – if you don’t like the arbitrator’s decision, you can’t go to court afterwards. In appropriate cases the contracting parties will actually set for the details of the process, the laws to be used, the tribunal, etc.
The parties to the contract can usually choose an arbitrator, providing they can agree on one. If they cannot, they will suggest that some independent body appoint the arbitrator(s) and, even, manage the process.
When arbitration is used in lower value consumer disputes, the arbitrator often makes a decision based on the written evidence which the parties send in, and doesn’t hold a hearing. This is a much quicker, cheaper process. Once the parties have decided to use arbitration and the process has begun, they usually give up their right to seek a resolution of the matter elsewhere, such as in court or tribunal.
After considering the parties’ submissions, the arbitrator issues a final and binding award. The award usually includes reasons for the decision.
The cost of arbitration varies. The fees can be quite high for disputants in complex cases, since there are fees for not only the attorneys, but also the arbitrators, expert witnesses, etc.
The Law Offices of Wolf & Pravato want to remind us that arbitration is intended to be less expensive, less formal, and more flexible than court, so the rules of evidence are not as strict, and parties can usually have a say in how they want the hearing to be conducted. Parties can choose a single arbitrator with relevant experience, or select an arbitral panel of three or five arbitrators. Obviously, the larger the panel, the more expensive the process is going to be, and this model is likely to be used in high value commercial disputes.