CAVEAT: I am biased - I am a mediator! That said, mediation and arbitration are so vastly different and should almost NOT be compared in the same sentence! Well, by that I mean to my way of thinking arbitration is more akin to litigation and mediation stands in a category and class of its own. It boils down to one word "control." So depending on the nature of the contract being entered into and the advice of one's attorney, pertaining to context and the specifics, I would vote for ALWAYS have a mediation clause as a required attempt to mitigate the chances of landing in litigation - yet carefully scrutinize how arbitration could feasibly work against you!
As a journalist who has covered legislation and litigation over arbitration clauses, including what's happening today in Congress and with the CFPB, arbitration clauses tend to favor the party granting the contract (e.g., a big company) to the disadvantage of a typical consumer. Not because arbitration is bad, but because most consumer contracts that require arbitration also forbid the signer from pursuing a lawsuit or class-action case against the company. That's why these clauses were invented in the first place --- to save the time and cost of defending a lawsuit that could cripple a company. From a consumer standpoint, arbitration is practical as long as the issues in dispute are relatively minor. But in all arbitration cases I have reviewed, the company has the upper hand because it has the lawyers, the experience and the resources.
Be careful. While arbitration or other ADR methods can be efficient and save litigation dollars they are also dangerous. In disputes against powerful adversaries such as insurance companies, banks, or large construction firms arbitration clauses have become offensive weapons designed to stack the deck against a complainant. The dominant party selects the arbitration company or the arbitrator, often one it has used before, and often one that would like to continue being selected, thus, there is a built-in bias in favor of the powerful party.
In cases involving parties of equal or near equal size, or in international disputes where jurisdiction and enforcement of awards can be confusing, arbitration can be useful. Make sure that each party can select one arbitrator, and those arbitrators select the third member of the panel. This tends to level the playing field.
I'm an Arbitration Expert. Having lost 2 million dollars because of the Arbitration Clause is a common client repose. Arbitration is a Private Judicial Process whereby an Arbitrator, usually a well respected retired Judge or Lawyer is appointed with the consent of both parties to Judge their dispute. In my over 38 years experience, the Arbitrator will a. Be favouring the deep pockets of the two litigants;
b. Is open to receiving a brown envelope;
Therefore, I don't favour Arbitration clauses unless I have more brown envelopes than my opponent.
Mediation, whether formally through a paid mediator (if the amount in controversy is high enough))or simply through an informal meeting of the parties is almost always beneficial. However, I no longer automatically include arbitration provisions in my contracts unless one or more of the parties requires it or the situation is somewhat unique. Arbitration has lost a lot of his initial attraction - lower cost alternative to litigation in the court system, especially when the parties are required to arbitrate through the American Arbitration Association (AAA). And there is no appeals process for bad decisions.
Essential clauses are aligned with extending agreements by placing incentives to perform in place and reasonable barriers to any idea of abandoning an agreement. These are normally contingency clauses that have triggers based on mutually agreed-upon parameters. Yes, they are beneficial in jurisdictions where they are backed up by legal support, but not so much where jurisdiction is questionable.
Please notice that I said "in advance of any dispute." I do not believe that giving up the right to make an informed decision regarding the best option for resolution should be made in advance. That being said, I am a mediator and believe as Abraham Lincoln said, "
Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough." I also include mediation clauses in the wills and trusts I draft as well as my own fee agreement. And yes, as others have said, there is a HUGE difference in arbitration, especially binding arbitration, and mediation.
I advise my clients not to sign such contracts in advance of a dispute. In my own fee agreement, I have a mediation clause because I do believe in alternate dispute resolution, but I also do not believe in taking rights away from my people.
I think it depends on a variety of factors, such as what is at risk, is the arbitration binding, if one party wants the ADR clause and the other party is hesitant but agreeing to it can cause the second part to then ask for a concession of higher value to them, etc.
Also, in certain employment situtations, court cases or statutes may trump such ADR clauses. Best to seek legal advice in any event.
Answers (1-10)
CAVEAT: I am biased - I am a mediator! That said, mediation and arbitration are so vastly different and should almost NOT be compared in the same sentence! Well, by that I mean to my way of thinking arbitration is more akin to litigation and mediation stands in a category and class of its own. It boils down to one word "control." So depending on the nature of the contract being entered into and the advice of one's attorney, pertaining to context and the specifics, I would vote for ALWAYS have a mediation clause as a required attempt to mitigate the chances of landing in litigation - yet carefully scrutinize how arbitration could feasibly work against you!
As a journalist who has covered legislation and litigation over arbitration clauses, including what's happening today in Congress and with the CFPB, arbitration clauses tend to favor the party granting the contract (e.g., a big company) to the disadvantage of a typical consumer. Not because arbitration is bad, but because most consumer contracts that require arbitration also forbid the signer from pursuing a lawsuit or class-action case against the company. That's why these clauses were invented in the first place --- to save the time and cost of defending a lawsuit that could cripple a company. From a consumer standpoint, arbitration is practical as long as the issues in dispute are relatively minor. But in all arbitration cases I have reviewed, the company has the upper hand because it has the lawyers, the experience and the resources.
Be careful. While arbitration or other ADR methods can be efficient and save litigation dollars they are also dangerous. In disputes against powerful adversaries such as insurance companies, banks, or large construction firms arbitration clauses have become offensive weapons designed to stack the deck against a complainant. The dominant party selects the arbitration company or the arbitrator, often one it has used before, and often one that would like to continue being selected, thus, there is a built-in bias in favor of the powerful party.
In cases involving parties of equal or near equal size, or in international disputes where jurisdiction and enforcement of awards can be confusing, arbitration can be useful. Make sure that each party can select one arbitrator, and those arbitrators select the third member of the panel. This tends to level the playing field.
I'm an Arbitration Expert. Having lost 2 million dollars because of the Arbitration Clause is a common client repose. Arbitration is a Private Judicial Process whereby an Arbitrator, usually a well respected retired Judge or Lawyer is appointed with the consent of both parties to Judge their dispute. In my over 38 years experience, the Arbitrator will a. Be favouring the deep pockets of the two litigants;
b. Is open to receiving a brown envelope;
Therefore, I don't favour Arbitration clauses unless I have more brown envelopes than my opponent.
Mediation, whether formally through a paid mediator (if the amount in controversy is high enough))or simply through an informal meeting of the parties is almost always beneficial. However, I no longer automatically include arbitration provisions in my contracts unless one or more of the parties requires it or the situation is somewhat unique. Arbitration has lost a lot of his initial attraction - lower cost alternative to litigation in the court system, especially when the parties are required to arbitrate through the American Arbitration Association (AAA). And there is no appeals process for bad decisions.
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Essential clauses are aligned with extending agreements by placing incentives to perform in place and reasonable barriers to any idea of abandoning an agreement. These are normally contingency clauses that have triggers based on mutually agreed-upon parameters. Yes, they are beneficial in jurisdictions where they are backed up by legal support, but not so much where jurisdiction is questionable.
Please notice that I said "in advance of any dispute." I do not believe that giving up the right to make an informed decision regarding the best option for resolution should be made in advance. That being said, I am a mediator and believe as Abraham Lincoln said, " Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough." I also include mediation clauses in the wills and trusts I draft as well as my own fee agreement. And yes, as others have said, there is a HUGE difference in arbitration, especially binding arbitration, and mediation.
I advise my clients not to sign such contracts in advance of a dispute. In my own fee agreement, I have a mediation clause because I do believe in alternate dispute resolution, but I also do not believe in taking rights away from my people.
I think it depends on a variety of factors, such as what is at risk, is the arbitration binding, if one party wants the ADR clause and the other party is hesitant but agreeing to it can cause the second part to then ask for a concession of higher value to them, etc.
Also, in certain employment situtations, court cases or statutes may trump such ADR clauses. Best to seek legal advice in any event.