A mediator works with the parties to identify the issues of greatest concern to them and explore terms that are acceptable to both sides – including solutions that may be different from what either party originally contemplated. Mediation can help bring such bridging solutions to light, in part because it’s confidential and neither side is ultimately bound, if a deal isn’t reached, by any of the ideas it considers in discussions with a mediator.
Mediation is usually voluntary although sometimes, legislation or policy requires a mediation attempt before arbitration or litigation can proceed.
When mediation leads to a mutually satisfactory settlement, it’s the quickest way of resolving a dispute.
An arbitrator or panel of arbitrators (typically, three) makes a binding decision on the matters in dispute based on the relevant law and/or contractual language and the evidence and arguments presented by the parties. Arbitration is a confidential and cost-effective alternative to litigation that brings a definitive end to a dispute and allows the parties to move forward.
Arbitration may be undertaken pursuant to a specific arbitration clause in a contract or statute, or initiated by parties even when such provisions don’t apply.
In most cases, the arbitrator or arbitral panel decides each issue on its merits. The alternative is final offer arbitration (FOA), in which each party submits a complete proposal on all issues and the arbitrator chooses the proposal that they determine is more reasonable. Because FOA is a “winner takes all” method, it is less commonly used, though it does encourage parties to avoid maximalist positions. FOA is better-suited to wage/rate disputes than more complex, multi-issue disputes.
A mediation-arbitration (med-arb) process begins with efforts, through mediation, to find mutually acceptable solutions to as many of the matters in dispute as possible – and then shifts to arbitration for any issues that can’t be resolved through mediation.
Med-arb has several advantages:
Some parties may worry that if they show an openness to compromise on certain issues during mediation and then wish to return to firmer positions in arbitration, the mediator-arbitrator’s arbitral decisions may be influenced by what was discussed in mediation. To address this concern, the terms for a med-arb process can include a provision allowing either party to trigger the appointment of a different individual to arbitrate any matters not resolved through mediation.
With that safeguard, med-arb can be a highly effective way of leveraging the benefits of both mediation and arbitration.