Arbitration and Mediation – The Process Explained


A.   Arbitration


Arbitration is an alternative means of settling a dispute by an impartial third person (“Neutral”) without the need to proceed with a formal court proceeding.  Arbitration has long been used in labor, construction, and securities regulation, but is now gaining popularity in other business disputes.  In the past 20 years, Arbitration has become the preferred method for businesses to resolve their commercial disputes. 

For business (contract) disputes, Arbitration is generally preferred as a means of resolving the matter in a forum which to avoids the expense, inherent delay, and acrimony of litigation and one which most importantly remains private.  Absent an appeal, arbitration awards and the conduct of the proceedings themselves are not a matter of public record.  Thus, businesses, can keep their business disputes confidential, can protect from the inadvertent disclosure of business records, (absent a court order, all pleadings, documents and records filed in a civil lawsuit, are available for anyone to review. 

Parties to a contract can agree to Arbitration at the time of first signing their agreement (compulsory arbitration), or sometimes even after the dispute has arisen by way of a voluntary submission.  

Absent an agreement of the parties or unless specifically provided for in the applicable arbitration rules, there is generally no discovery permitted with the exception of the right of a party to subpoena documents and records (subpoena duces tecum) or the ability to subpoena witnesses to appear at the Arbitration hearing itself.  Every state has in effect some statutory provision granting the right of the Arbitrator to execute a subpoena compelling the production of documents or witnesses. 

There are simplified rules of evidence in arbitration, affidavits or declarations are generally admissible in lieu of live testimony of a witness, and many of the foundational type objections to the admission of documentary evidence are either relaxed or completely ignored.  “Hearsay” is also frequently admitted into evidence and considered by the Arbitrator, even over the objection of a party.

The arbitrators’ decision is given after an informal proceeding where each side presents evidence and witnesses. Arbitration hearings may last only a few hours or may take days or weeks for more complex matters.  At the conclusion of the hearing and submission of exhibits, the Arbitrator will issue an Arbitration Award (generally 30 days after the close of the hearing).

B.    Mediation


Mediation is much like Arbitration with one significant difference.  In Arbitration, the Arbitrator or Neutral, considers testimony and evidence, and at the conclusion of the proceedings, issues a formal Arbitration Award making findings and rulings (much like a judge), and enters an award or verdict (like a judge or jury) determining which party wins and which party loses, and if money is at issue, the amount awarded. 

In Mediation, the Neutral, still hears generally the same testimony and evidence (albeit in a much more summary or condensed format), and instead of issuing a ruling or award, acts to “facilitate” a resolution of the dispute which is acceptable to both parties.  Mediation by its nature is a non-adversarial method of alternative dispute resolution (ADR) in which a neutral third party helps resolve a dispute. The mediator does not have the power to render a final decision on the matter or order an outcome. If a mutually satisfactory resolution cannot be reached, the parties can pursue either formal binding arbitration, or a civil lawsuit.