FAQ: Alternative Dispute Resolution – Mediation and Arbitration
Civil court lawsuits and trials are the traditional method for resolving legal disputes. However, concerns about court congestion and delays, rising litigation costs, and the negative psychological and emotional impact of litigation have increased the use of alternative dispute resolution (“ADR”) techniques. Two frequently used ADR processes are mediation and arbitration. Mediation is essentially negotiation facilitated by a neutral third party. Arbitration is a binding resolution process similar to trial, but with fewer technical rules and requirements. ADR procedures can be initiated by the parties or may be compelled by legislation, the courts, or contractual terms. Each method of dispute resolution has benefits and drawbacks. It is, therefore, important for an individual considering the use of ADR to understand the different processes in the context of their specific needs and goals.
What is Mediation?
When parties are unwilling or unable to resolve a dispute, they often turn to mediation. Mediation is generally short-term, structured, task-oriented, and a "hands-on" process. In mediation, the disputing parties work with a neutral third party, the mediator, to resolve their disputes. The mediator facilitates the resolution of the parties' disputes by supervising the exchange of information and the bargaining process. The mediator helps the parties find common ground and deal with unrealistic expectations. He or she may also offer creative solutions and assist in drafting a final settlement. The role of the mediator is to interpret concerns, relay information between the parties, frame issues, and define the problems.
Mediation is usually a voluntary process, although in some cases statutes, rules, or court orders may require participation in mediation. Mediation is common in small claims courts, housing courts, family courts, and some criminal court programs and neighborhood justice centers. Unlike the litigation process, where a neutral third party, usually a judge, imposes a decision over the matter, the parties and their mediator ordinarily control the mediation process, deciding when and where the mediation takes place, who will be present, how the mediation will be paid for, and how the mediator will interact with the parties.
If a resolution is reached, mediation settlement agreements may be oral or written, and content varies with the type of mediation. Whether a mediation agreement is binding depends on the law in the individual jurisdictions, but most mediation agreements are considered enforceable contracts. In some court-ordered mediations, the agreement becomes a court judgment. If an agreement is not reached, however, the parties may decide to pursue their claims in other forums.
The mediation process is generally considered more prompt, inexpensive, and procedurally simple than formal litigation. It allows the parties to focus on the underlying circumstances that contributed to the dispute, rather than on narrow legal issues. The mediation process does not focus on truth or fault. Questions of which party is right or wrong are generally less important than the issue of how the problem can be resolved. Disputing parties who are seeking vindication of their rights or a determination of fault will not likely be satisfied with the mediation process.
What is Arbitration?
Arbitration is the most formal alternative to litigation. Depending upon the circumstances and whether the arbitration is contractual or judicial, arbitration may be either binding or nonbinding. In this process, the disputing parties present their case to a neutral third party, who renders a decision. Arbitration is widely used to resolve disputes in both the private and public sector. Arbitration is generally considered a more efficient process than litigation because it is quicker, less expensive, and provides greater flexibility of process and procedure. The parties often select the arbitrator and exercise control over certain aspects of the arbitration procedure. Arbitrators typically have more expertise in the specific subject matter of the dispute than do judges. They may also have greater flexibility in decision-making.
Under the traditional arbitration model, parties voluntarily participate in the arbitration process. Their participation may be the result of a preexisting contractual provision or an agreement that occurs after the dispute has arisen. Arbitration agreements generally provide a means for selecting the arbitrator or panel of arbitrators, the format of the hearing, the procedural and evidentiary rules to be used, and the controlling law. If these details are not provided for in the contract, the parties may seek assistance from agencies that administer arbitrations.
Typically, a party initiates the arbitration process by sending the other party a written demand for arbitration. The demand generally describes the parties, the dispute, and the type of relief sought. The opposing party usually responds in writing, indicating whether they believe the dispute is arbitrable. If the dispute is arbitrable, the parties then select an arbitrator or panel of arbitrators. In most jurisdictions, the format for arbitration is similar to a trial. The parties make opening and closing arguments, present testimony and witnesses, and offer documents. The evidentiary rules, however, are not applicable and the discovery and cross-examination opportunities are limited.
Compulsory arbitration has grown in the United States particularly in the areas of public sector employment disputes, court-annexed programs, and medical malpractice disputes. Several states have enacted legislation requiring critical public employees such as police, teachers, and firefighters to participate in arbitration as the final step in negotiating the terms of their collective bargaining agreements. Additionally, court-annexed arbitration has become compulsory for certain categories of civil cases in several state and federal district courts.
Court annexed arbitration differs from the traditional arbitration model in several ways. It often requires parties to arbitrate rather than voluntarily participating. Parties have a right to a trial if they are not satisfied with the arbitrators' award, but in some systems parties must pay court cost or arbitrators' fees if they do not have a better outcome at trial.