ARBITRATION VS. MEDIATION

Meetings & Conventions: Planner's Portfolio December 2002 Current Issue
December 2002 PLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.

ARBITRATION VS. MEDIATION

Before rushing to court, consider alternative means to resolve a dispute

When a supplier or a planner fails to comply with the terms of a contract, the reaction of the injured party often is to sue. Litigation costs are huge, however, in both money and time. To avoid court, first consider alternative forms of dispute resolution.

This general term means anything from informal mediation to settlement conferences, formal mediation and arbitration. The following definitions should help filter out the confusion.

FOR ARGUMENT’S SAKE
Mediation involves retaining an objective individual as a go-between. The mediator hears and presents the issues from one side to the other, trying to reach a settlement. The mediator is not a judge, jury or arbitrator; rather he is a facilitator who attempts to resolve the matter.

Even if you do end up in front of a judge, most federal and state courts require that a mediation attempt take place first. Bear in mind that mediation is nonbinding and also confidential. It only becomes a resolution when the parties agree to a settlement. Whatever you tell the mediator cannot be disclosed to the other party without your permission. The discussions made during mediation are not admissible in court. Mediation is voluntary.

In several major cases, I’ve had good luck with experienced mediators. The process does take time, patience and the ability to compromise.

Resolutions reached by way of arbitration, on the other hand, generally are binding and final. Arbitrations can take place before a single person or a panel of three individuals who make a decision on the case. With a panel, each party selects an arbitrator, and the two chosen arbitrators then select a third.

Arbitrators and mediators generally are found through the nonprofit American Arbitration Association (www.adr.org). There are, however, other non- and for-profit organizations that provide the same services.

Arbitration can be expensive. Initial fees must be paid up front by the party seeking arbitration. The hiring party then must pay the arbitrator(s) a daily fee plus costs, as well as attorneys’ fees. If the contract provides, the party found at fault might have to reimburse these costs.

I believe major disputes, where damages would be in excess of $100,000 or complicated legal issues are involved, should go to court, where you have an opportunity for an appeal. For lesser disputes, arbitration does work, but it’s not necessarily cheaper.

IN THE CONTRACT
I usually insert a clause in contracts saying the parties first will try to resolve their differences between themselves before going to court or to binding arbitration.

Often, contracts include a clause requiring arbitration of disputes in accordance with the Commercial Rules of Arbitration of the American Arbitration Association.

Unfortunately, planners and suppliers often don’t know what those rules require. Further, the rules do not cover the location of the arbitration, the method or criteria (experience, background in the meetings industry, etc.) by which arbitrators are selected. Be sure to discuss with a knowledgeable attorney anything else you might need to add to your arbitration clause to protect your interests.

When representing those doing business abroad, I insert an international arbitration clause in the contract to designate what issues are subject to arbitration, how the arbitrator will be chosen, which jurisdiction’s laws will apply and where the arbitration will be held. Also, you should delineate who will handle the administration of the arbitration, such as the American Arbitration Association or the International Chamber of Commerce.

Jonathan T. Howe, Esq., is a senior partner in the Chicago and Washington, D.C., law firm of Howe & Hutton, Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at [email protected].