Arbitration

So, you signed a contract with an arbitration provision and the other party to the contract has sent you a demand for arbitration. What does that mean and what do you do now?

Agreements to refer disputes to arbitration generally have a special status in the eyes of the law as arbitration is a preferred method of dispute resolution in the law. Arbitration is private, meaning that the proceedings are hidden from public view and the results are not made public. This means that an adverse ruling against you will not become a precedent.

Some of the advantages of arbitration are:

• In contrast to litigation, where one cannot “choose the judge”, arbitration allows the parties to choose their own tribunal. This is especially useful when the subject matter of the dispute is highly technical: arbitrators with an appropriate degree of expertise (for example, surveying expertise in the case of a construction dispute, or expertise in commercial property law in the case of a real estate dispute) can be chosen.
• Arbitration is often faster than litigation in court.
• Arbitral proceedings and an arbitral award are generally non-public, and can be made confidential.
• In arbitral proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country will be automatically applied.
• Because of the provisions of the New York Convention of 1958, arbitration awards are generally easier to enforce in other nations than court verdicts.
• In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability.

Some of the disadvantages of arbitration are:

• If the arbitration is mandatory and binding, the parties waive their rights to access the courts and to have a judge or jury decide the case.
• There is sometimes a disconnect between the presumption of confidentiality and the realities of disclosure and publicity imposed by the courts, arbitrators, and even the parties themselves.
• If the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee.
• There are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned.
• Although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays.
• In some legal systems, arbitration awards have fewer enforcement options than judgments; although in the United States arbitration awards are enforced in the same manner as court judgments and have the same effect.
• Discovery may be more limited in arbitration or entirely nonexistent.
• Unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to “confirm” an award.

Mediation

Mediation is a structured, interactive process where an impartial third party neutrally assists disputing parties in resolving conflict through the use of specialized communication and negotiation techniques. All participants are encouraged to actively participate in the process. Mediation is a “party-centered” process in that it is focused primarily upon the needs, rights, and interests of the parties. The mediator uses a wide variety of techniques to guide the process in a constructive direction and to help the parties find their optimal solution.

The term mediation broadly refers to any instance in which a third party helps others reach an agreement. More specifically, mediation has a structure, timetable, and dynamics that “ordinary” negotiation lacks. The process is private and confidential, possibly enforced by law. Participation is typically voluntary. The mediator acts as a neutral third party and facilitates rather than directs the process. Mediation is becoming a more peaceful and internationally accepted solution to end the conflict. Mediation can be used to resolve disputes of any magnitude.

Cost

While a mediator may charge a fee comparable to that of an attorney, the mediation process generally takes much less time than moving a case through standard legal channels. While a case in the hands of a lawyer or a court may take months or years to resolve, mediation usually achieves a resolution in a matter of hours. Taking less time means expending less money on hourly fees and costs.

Confidentiality

While court hearings are public, mediation remains strictly confidential. No one but the parties to the dispute and the mediator or mediators know what happened. Confidentiality in mediation has such importance that in most cases the legal system cannot force a mediator to testify in court as to the content or progress of mediation. Many mediators destroy their notes taken during a mediation once that mediation has finished. The only exceptions to such strict confidentiality usually involve child abuse or actual or threatened criminal acts.

Control

Mediation increases the control the parties have over the resolution. In a court case, the parties obtain a resolution, but control resides with the judge or jury. Often, a judge or jury cannot legally provide solutions that emerge in mediation. Thus, mediation may produce a result that is mutually agreeable for the parties.

Compliance

Because the result is attained by the parties working together and is mutually agreeable, compliance with the mediated agreement is usually high. This further reduces costs, because the parties do not have to employ an attorney to force compliance with the agreement. The mediated agreement can be fully enforceable in a court of law.

Mutuality

Parties to a mediation are typically ready to work mutually toward a resolution. In most circumstances the mere fact that parties are willing to mediate means that they are ready to “move” their position. The parties thus are more amenable to understanding the other party’s side and work on underlying issues to the dispute. This has the added benefit of often preserving the relationship the parties had before the dispute. Parties as a part of the mediation are encouraged to negotiate on the basis of interests rather than positions that they hold.

Support

Mediators are trained in working with difficult situations. The mediator acts as a neutral facilitator and guides the parties through the process. The mediator helps the parties think “outside of the box” for possible solutions to the dispute, broadening the range of possible solutions.

The highly experienced lawyers at Lustig & Wickert have conducted hundreds of arbitrations and mediations. It is that experience that makes the difference when you’re involved in a commercial dispute.  Call us at 847.509.9090 for a free confidential consultation and evaluation.