When parties find themselves involved in a serious conflict, they often try to avoid the expense and hassle of litigation by turning to one of the two most common alternative dispute resolution processes: mediation or arbitration. Disputants who are concerned about these drawbacks might want to consider a hybrid mediation-arbitration approach called med-arb.
What’s the difference between mediation and arbitration? In a mediation process, a neutral, trained mediator works to help disputants come to a consensus on their own. Rather than imposing a solution, the mediator tries to engage the parties more deeply in the issues at stake. With the aid of their mediator, disputants ideally reach a sustainable, voluntary, and often nonbinding agreement.
In arbitration, a neutral, trained arbitrator serves as a judge who is responsible for resolving the dispute. Similar to a lawsuit, the arbitrator listens to arguments and evidence, then renders a binding decision. Arbitration proceedings are usually confidential, and the outcome is binding and cannot be appealed.
Although mediation and arbitration are both effective ways of ending disputes, each can have drawbacks, depending on the situation. Mediation can end in impasse, a prospect that some disputants may want to avoid. As for arbitration, it doesn’t allow disputants to be involved in deciding the outcome, as mediation does.
How Does Med-Arb Work?
In a med-arb process, parties first reach agreement on the terms of the process itself. Typically—and unlike in most mediations—they must agree in writing that the outcome of the process will be binding.
Next, they attempt to negotiate a resolution to their dispute with the help of a mediator. As in a traditional mediation, the mediator may suggest caucusing with each party individually to discuss possible proposals in addition to bringing disputants together to air their views and brainstorm solutions.
In med-arb, if the mediation ends in an impasse, or if issues remain unresolved, the process isn’t over. At this point, parties can move on to arbitration. The mediator can assume the role of arbitrator (if he or she is qualified to do so) and render a binding decision quickly based on her judgments, either on the case as a whole or on the unresolved issues. Alternatively, an arbitrator can take over the case after consulting with the mediator.
The Benefits of Med-Arb
Typically, the med-arb process ends with a successfully negotiated agreement, and the arbitration stage is not necessary. Why? Because the threat of having a third party render a decision in binding arbitration often motivates disputants to reach an agreement.
For this reason, med-arb can be a wise choice when parties are facing intense pressure to reach a resolution by a deadline, as in a labor dispute. It can also be beneficial when disputants need to work effectively with one another in the future.
Finally, med-arb can also be cost-effective: when disputants hire one person to serve as mediator and arbitrator, they eliminate the need to start the arbitration from square one if mediation fails.
There are caveats to factor in when you’re considering med-arb. When disputants are aware that their mediator could ultimately make a binding decision about the case, they may feel inhibited about sharing confidential information with him or her about their interests. If the mediation moves to arbitration, it could be difficult for the mediator-turned-arbitrator to “forget” that confidential information and focus exclusively on jointly shared information. Disputants might avoid this possibility by having different individuals serve as mediator and arbitrator, though this solution requires additional time and cost.
In addition, disputants may feel pressured to reach an agreement to avoid arbitration and the possibility that the mediator-turned-arbitrator will reach a decision that pleases them less.
What About Arb-Med?
The concern about the revelation of confidential information in med-arb is eliminated in arb-med, a little-known alternative dispute resolution process. In arb-med—which, as it sounds, functions somewhat in the reverse of med-arb—a trained, neutral third party hears disputants’ evidence and testimony in an arbitration; writes an award but keeps it from the parties; attempts to mediate the parties’ dispute; and unseals and issues her previously determined binding award if the parties fail to reach agreement, writes Richard Fullerton in an article in the Dispute Resolution Journal.
Although this process removes the concern about misuse of confidential information, it does not remove the pressure on parties to reach agreement in mediation, notes Fullerton. It also raises a new problem: the arbitrator/mediator cannot change her previous award based on new insights gained during the mediation. As a result, she may pressure the parties to reach an agreement to avoid revealing an award she now disagrees with.
The Bottom Line on Med-Arb and Arb-Med
If you are considering med-arb (or arb-med), or if another party has recommended it to you, weigh the potential benefits and concerns carefully. Med-arb has a proven ability to get disputes resolved relatively quickly and amicably, but a straightforward mediation or arbitration process will often be sufficient to meet your needs.
Have you ever found benefit from med-arb? Share your experience in the comments.