Mediation and arbitration are both alternative dispute resolution techniques that can be used to decide a legal disagreement without the need for a trial in a standard court of law. But how do these two forms of alternative dispute resolution differ?
Understanding Mediation
In mediation, parties in a legal dispute participate in formal settlement negotiations facilitated by a neutral third party called a “mediator.” The mediator does not perform an adjudicative role during mediation (in other words, doesn’t judge the outcome of the case on their own) to decide any issues for the parties. Instead, the mediator helps the parties understand the strengths and weaknesses of each side’s legal case and suggests solutions to help the parties negotiate a settlement. This is usually accomplished by meeting in separate rooms without the other party’s direct interaction.
Although parties may have a contractual agreement requiring them to attend mediation in good faith, mediation remains a voluntary process. Either party may leave the mediation if they believe further negotiation, even with the help of the mediator, will not help them settle.
Some of the advantages of mediation include:
- Cost-effective: Mediation allows parties to resolve disputes much more cost-effectively than litigation, as the primary costs of mediation only include the mediator’s fees, renting conference space (if necessary), and the parties’ own legal fees if they hire attorneys to assist them.
- Control over outcomes: Unlike litigation, mediation gives parties broad control over the outcome of the dispute since they must negotiate the terms of any settlement reached in mediation and can walk away from the proceedings if they consider a settlement not feasible.
- Potential to preserve relationships: Mediation can help parties in a dispute preserve their working relationship, which the parties may find desirable if they have ongoing business yet are disputing issues like future investments or employment of owners.
Understanding Arbitration
Arbitration provides a trial-like alternative to traditional litigation. In arbitration, parties submit their dispute to an individual or panel of neutral parties called “arbitrators,” who undertake a role like judges performing in bench trials. In the arbitration proceedings, witnesses can be called and other evidence presented to the arbitrators. Parties must agree in advance to submit their disputes to arbitration. They may agree to “binding” arbitration, wherein an arbitrator’s determination results in an enforceable award. The alternative is “non-binding” arbitration, in which case the parties retain the right to reject an arbitrator’s determination. Then, instead, seek an in-court determination. Although arbitration has a structure resembling a trial, arbitration proceedings can produce resolutions quicker and at a lower cost than standard court litigation. Arbitration also enables parties in a dispute to keep the matter private and out of the public record.
When Must a Person Submit to Arbitration in Missouri
In Missouri, to force arbitration, the following requirements generally must be met:
- Existence of a Valid Arbitration Agreement
- Arbitration can be compelled only if there is a valid, enforceable agreement between the parties.
- The agreement can be a standalone arbitration contract or a clause within another contract.
- Missouri follows the Missouri Uniform Arbitration Act (MUAA) and also recognizes the Federal Arbitration Act (FAA) in cases involving interstate commerce.
- In certain cases, Missouri courts have required specific language explaining that arbitration means waiving the right to a jury trial.
- Some consumer protection cases and employment contracts may require additional disclosures.
- Missouri Statute 435.460 RSMo provides the following: Notice of arbitration provisions required. — Each contract subject to the provisions of sections 435.350 to 435.470 shall include adjacent to, or above, the space provided for signatures a statement, in ten-point capital letters, which reads substantially as follows: “THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.”
- Scope of the Arbitration Agreement
- The dispute must fall within the terms of the arbitration clause.
- Courts may interpret ambiguous clauses in favor of arbitration, but they will not compel arbitration for matters outside the agreement’s scope.
- No Grounds for Revocation
- The arbitration agreement must not be unconscionable, fraudulent, or obtained through duress.
- Missouri courts may refuse to enforce agreements deemed unfair or one-sided.
- Including a severability clause (stating that if one part of the contract is invalid, the rest still applies) can help uphold arbitration agreements.
- Filing a Motion to Compel Arbitration
- If one party refuses to arbitrate, the other party can file a motion to compel arbitration in a Missouri court.
- The court will review the agreement and determine whether arbitration is required.
- Federal Arbitration Act (FAA) Considerations
- If the dispute involves interstate commerce, federal law (FAA) may preempt Missouri law and require arbitration if a valid agreement exists under federal law.
Differences Between Arbitration vs Mediation
Some of the differences between arbitration and mediation in disputes include:
- Mediation involves a collaborative process between the parties, whereas arbitration has an adversarial, adjudicative nature.
- A mediator merely facilitates settlement negotiations between the parties, whereas an arbitrator serves as a (final) decision-maker.
- Mediation does not bind the parties until they settle, whereas arbitration typically results in a binding award.
- Arbitration has a more formal procedure resembling a trial, whereas mediation looks more like an informal settlement negotiation.
Contact An Experienced Business Attorney Today
Mediation or arbitration may offer a path toward a fair and efficient resolution when you find yourself in a legal dispute. When writing a contract, consider whether you want to include mediation and/or arbitration requirements. Let an experienced business attorney from Uthoff, Graeber, Bobinette & Blanke advocate for your rights and interests. Contact us today for a free, confidential consultation with our legal team to learn more about mediation and arbitration in legal disputes and contract framing.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute legal advice. Always consult with a qualified attorney regarding your specific situation. Your particular facts and circumstances may alter conclusions derived from information contained in this blog. The author assumes no liability for any errors or omissions in the content and is not responsible for any damages resulting from the use of this information.