Is Mediation Binding?
Alternative Dispute Resolution is the optimal path for two companies resolving their differences. How do you know what is legally binding in these alternative types of agreements? While both Mediation and Arbitration can be good alternatives to litigation, the way they affect the parties involved differs.
Mediation is when two parties agree to try and work things out, with the help of a facilitator. This intermediary is, unsurprisingly called a ‘Mediator.’ Mediators are typically very experienced in facilitating the resolution of conflicts between two parties. In many scenarios the Mediators are retired judges who have undergone years of training in negotiationand facilitation.
The key issue to remember for mediation is that everyone at the table is there by free-will. No one is being forced to make an agreement. Thus, a mediator cannot just decide that one party has more merit over the other, and legally bind the parties to a certain action. Rather, the opposing parties have to reach an agreement. However, once an agreement is made, a new contract is signed. This contract is legally binding.
In a lot of scenarios, the whole dispute occurred on the premise of an existing contract. So what is one more broken contract? If one party broke an original contract, and a mediated contract, the other party may have a far stronger case should it ever move to litigation.
The whole point of mediation is to iron out the differences of opinion that arose from an original agreement. If a mediation is successful, both parties should feel satisfied with the new agreement. Neither is in an ideal circumstance, but both perceive that they are making the best of a bad situation.
Is Arbitration Binding?
This question is a little more complex. In short, yes. Either both parties have voluntarily submitted to arbitration, or both parties originally agreed to arbitration via an arbitration clause in an original agreement/contract. Both parties opt out of going to court, but submit their cases to an arbitrator. That arbitrator reviews both sides, and the evidence, and makes a decision. It can be expensive, but is typically much faster, less complicated, and less expensive than a court case that has gone all the way to judgment.
The original contract should specify whether the arbitration is binding or non-binding. If it is non-binding, either part can go through the whole process of arbitration, and then reject the arbitration’s final award, and continue to a trial. This is expensive for both sides, and having the matter previously decided on at arbitration can affect the outcome of the trial.
Binding arbitration typically can not be revisited in court. If one party believes that ‘misuse of power’ has occurred, or some kind of fraud has taken place with arbitration, then there are grounds to move a binding arbitration to court. Otherwise, courts typically uphold those awards.
As far as enforcing arbitration awards, we highly advise you contact an attorney for more information. However, for information purposes, we can state that various States have laws on the enforcement of arbitration awards. In addition, two federal laws regulate arbitration awards. The Federal Arbitration Act, and the Uniform Arbitration Act.
Typically, all the winning party must do is to file a motion to confirm the award in an appropriate court. The losing party has a certain amount of time to file a dispute of the award, for very specific reasons. If those reasons cannot be proven, or there is no dispute, typically, the court awards the judgment. The award holder now has legal authority to collect on the judgment.