Monday, March 12, 2007

Mediation & Arbitration: Keeping Businesses Out of Court

I recently came across an article in the San Francisco Chronicle which discusses basic concepts of mediation and arbitration in the context of helping businesses consider ways of minimizing the costs associated with court litigation.

I have pasted the full article below and also provide a link to the electronic article at The February 14, 2007 article by is titled: "How arbitration and mediation can keep businesses out of court."

Litigation is an expensive, frustrating and generally inefficient way to resolve disputes. That's why alternative dispute resolution (ADR) is becoming an increasingly popular means of resolving lawsuits before trial and of avoiding litigation altogether.

ADR includes both arbitration and mediation. Although they are different procedures, their goal is the same: to minimize the expense and delay associated with litigation. Numerous public and private organizations provide both mediation and arbitration services.

Arbitration is an adversary proceeding in which parties present evidence and arguments before a third party (or panel), who then decides the dispute much like a judge would in a trial.

An arbitrator can be a judge but is more often an attorney or expert, depending on the subject matter. Usually, the parties agree on the arbitrator beforehand.

Arbitration can be voluntary, judicially mandated or contractual; and the outcome of an arbitration can be either binding or nonbinding (advisory).

In binding arbitration, the parties agree in advance that the arbitrator's decision or monetary award will be final. It's a substitute for a court proceeding and cannot be reviewed or overturned, except under very limited circumstances.

In nonbinding (advisory) arbitration, the decision is not final, but rather intended to help guide the parties toward settlement.

Many contracts today, including collective bargaining agreements and health care benefit packages, contain provisions that compel binding arbitration of disputes. In negotiating any contract, parties may agree in advance to arbitrate almost any dispute.

In mediation, a third party attempts to facilitate communication and compromise between parties in conflict. Mediation is not a legal proceeding, although it can occur during the course of a lawsuit.

Unlike arbitration, the neutral party's role is not to decide who wins but to bring the parties closer together and help overcome obstacles to settlement. The actual structure and conduct of a mediation is usually much less formal than an arbitration.

While an arbitrator's role is generally passive, a mediator may become aggressively involved in trying to settle a dispute.

Many mediators will meet privately with each side and point out the strengths and weaknesses of their respective positions. The mediator also will typically communicate settlement proposals back and forth and help the parties react to those proposals.

Mediation is almost always voluntary and cannot be imposed on the parties, although some courts may require the parties in a lawsuit to attempt to mediate their dispute before the case goes to trial.

Using ADR
Cases suitable for arbitration include:

Construction contracts

Commercial contracts

Banking disputes

Intellectual property

Medical malpractice

Employment discrimination

Multiparty disputes

International disputes

Cases involving critical public employees, such as police officers, teachers and firefighters

Cases suitable for mediation include:

Business disputes

Partnership disagreements

Contract issues


Will contests

Employment issues


Nonviolent crime

Negotiating arbitration

If an agreement includes an arbitration clause, negotiate the terms. For example, you might want to provide for three arbitrators instead of one or require that certain rules be followed. You can find details about arbitration and mediation rules and find professionals at the American Arbitration Association ( provides information about products and services for entrepreneurs, small businesses and professionals to start, manage, finance and build a business. Visit

This article appeared on page C - 4 of the San Francisco Chronicle

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