Arbitration & Mediation
Arbitration and mediation represent two methods of alternative dispute resolution (ADR) that may assist parties in resolving their disputes. These two dispute resolution methods are alternatives to litigation, or the process of resolving a claim in court, hence the term alternative dispute resolution. Because litigation can be a long, complicated, expensive process, some parties are increasingly turning to alternative dispute resolution to avoid the courts when a conflict arises. Arbitration and mediation allow parties to bring their cases to neutral third parties for resolution. Arbitration is more formal than mediation and the arbitrator's decision is usually binding on the parties, whereas mediation focuses on negotiation and the mediator seeks to facilitate an agreement between the parties. In some states, litigants must first participate in arbitration or mediation before they can proceed to trial.
Arbitration is used worldwide as a faster, less expensive way to end disputes than going to court. In the United States, parties generally only arbitrate where they agree to do so. Arbitration agreements are generally divided into two types. The first occurs when parties enter into a contract that contains an arbitration clause, which provides that if a dispute should arise, it will be resolved by arbitration. The second type of agreement is signed after a dispute has arisen, wherein the parties agree that the dispute should be resolved by arbitration. This is sometimes called a submission agreement. Both agreements are legally binding contracts between the parties.
Once the parties have agreed to arbitration, an arbitrator or panel of arbitrators is chosen. Both sides must agree on one arbitrator, or each side chooses one arbitrator and the two arbitrators select a third to create a panel. Arbitration hearings are a simplified version of a trial. As with a trial, both parties may receive documents from other parties, prior to the hearing. During the hearing, each party has the right to present documents and witnesses, and to cross-examine the adverse witnesses.
Arbitrations also feature simpler rules of evidence, than in the courtroom. The parties often can decide what procedural rules will be followed during the hearing, which does not take as long as a trial. The arbitrator usually makes a decision a few weeks after the hearing. Although an arbitrator most commonly awards money damages to one party, he may also order specific performance of a contract or order a party either to do something or refrain from doing something.
The information presented to the arbitrator, as well as the arbitrator's award, are not made a part of the public record as with litigation. Because arbitration is binding, unless the parties have specifically agreed only to non-binding arbitration, decisions by arbitrators are usually final. While an unsatisfied party may appeal to a court, courts seldom overturn arbitrators' decision.
Arbitration is used often in the commercial context, as businesses sought to resolve disputes in a faster, less expensive and less adversarial manner. This led to the enactment of the United States Arbitration Act of 1925 (USAA), which made agreements to arbitrate valid and enforceable, with a few limitations. The USAA is now known as the Federal Arbitration Act.
The U.S. Congress, using its constitutional authority to regulate interstate commerce, enacted federal law that supports arbitration, in Title 9 of the U.S. Code. Where federal law is applicable, its terms prevail over the laws many states have enacted regulating alternative dispute resolution, such as the Uniform Arbitration Act, which 35 states have enacted as state law. The arbitration agreement and decision of the arbitrator therefore are enforceable under state and federal law, subject to limited defenses.
Arbitration agreements and awards often are also enforceable internationally: The United States implemented the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1970. This international agreement, also known as the New York Convention, provides for the enforcement of foreign arbitral awards on the territory of the contracting parties.
Mediation offers an even simpler, more flexible alternative to litigation than arbitration. Like arbitration, mediation is voluntary, though some states may require parties to mediate a dispute before they may proceed to trial. Mediators, individuals trained in negotiation who remain neutral, bring parties together and create a dialogue in an attempt to work out a solution to a dispute that both parties can agree upon.
A mediator does not impose a solution on the parties as an arbitrator does. Mediator codes-of-conduct in the United States emphasize client-directed solutions. Mediation does not always mean bringing disputing parties face-to-face with each other to discuss a conflict. Instead, the mediator may act as a liaison between the parties, employing what is known as "shuttle diplomacy."
For mediation to be used successfully, the parties must be willing to negotiate a positive solution to their problem, and to be able to participate in a discussion about interests, objectives, options, and proposed solutions. The negotiating skills of mediators may affect the parties' ability to reach an agreement. Mediation practices and requirements vary from state to state, and some states may require specific licenses, training, and continuing education for mediators.
Conflicts commonly resolved by mediation include family law, landlord-tenant, environmental, and particularly employment disputes. The U.S. Equal Employment Opportunity Commission (EEOC) offers parties in a workplace dispute an opportunity to mediate their claim so that the parties may discuss the issues raised in charges brought to the EEOC, clear up misunderstandings, determine underlying interests or concerns, find areas of agreement and incorporate areas of agreement into resolutions.