Wednesday, February 11, 2009

What Did You Agree To? Mediation/Arbitration.

In the first segment of this series, I am going to explain what Mediation and Arbitration is and why it may be in contracts or agreements you have agreed to without knowing.

When there is a dispute with an agreement, there are a few ways to handle it. Most people would assume that court is the pinnacle of trying to come to a resolution. Court brings with it delays, complexity, and expense.

Alternative Dispute Resolution (ADR) is the term used for solving arguments without having to go through the traditional legal channels. They include.

  • Negotiation
  • Mediation
  • Arbitration
Negotiation is essentially a commitment to sit down and try to hammer out a solution with fairness, and a desire to solve. In the coming weeks I will have a few articles on negotiation techniques, and methods.

Mediation is used when the two sides still want to solve the problem but are at an impasse. A third neutral party is brought in, and tries to bring the two sides together, by highlighting common elements, and making sure the dialogue is fair, and balanced. A mediator does NOT pass opinion. A mediator does not evaluate if the outcome is fair. They only facilitate the sides reaching an agreement. A mediator will draft that agreement for the two sides so they now have something moving forward.

Family mediators are specially trained at dealing with family dynamics, and mediate separation, divorce, and custody battles. Mediators are also used commonly in employment situations, unions, collective bargaining agreements, etc.

Arbitration is when a neutral third party adjudicates the problem. Essentially they are a judge. They listen to both sides and then they issue a ruling. In binding arbitration, that ruling is, well binding. Both parties must honour it. It is very difficult to get the courts to try to overturn a binding arbitration decision.

Sometimes arbitration is not binding. Both sides can take the issue to court after a decision. However the results of the arbitration will be a good indicator of the outcome in court. A perfect example of arbitration is Judge Judy, People's Court etc. Although the "judges" had worked as real judges in their career, they are effectively arbitrators. the "court rooms" are not part of the legal court system. It is effectively private court.

If you have agreed to resolve all disputes through Alternative Dispute Resolution, you can still use a lawyer. It is advised that you always speak to a lawyer prior to a Dispute Resolution. Lawyers are allowed to represent you in mediation and arbitration settings. Often the issue can be solved within months instead of years. The total cost is usually much less, primarily because of how quickly it can be resolved in.

However if you agree to ADR you may not be able to sue in court, until you go through the agreed resolution process.

A few things to watch out for, are the location of where the Arbitration will take place. Companies will try to use a location close to them, so make sure you are aware of this.

Here is an example clause that would bind you to Arbitration.

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) shall be binding, and may be entered in any court having jurisdiction thereof.

Other things that may be included in such a clause would be the language, location, number of arbitrators, time period to resolve, and sometimes even what dispute resolution company may be used to provide the mediators or arbitrators.

If you are looking in a contract to see if there is an arbitration provision, search for Dispute Resolution. That is a very common header for such a clause.

While agreeing to ADR (mediation/arbitration) in on itself is not a negative, your rights for going to court, or how disputes will be addressed could be affected. So it is important you understand how a contract can be disputed prior to signing the bottom line.

Next part of the What Did You Agree To? series will be about selective jurisdiction clauses.

Until then...

Copyright © 2009 Peter MacSweeney.
All rights reserved. Reproduction in whole or in part without the express written consent of the author is forbidden. Contact the author through the comment form for all inquiries, including media.

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