In a prior article I extolled the virtues of mandatory mediations. The context of that article was in the litigation forum that prescribes a process that requires the parties to submit to mandatory mediation and, if they refuse to participate, they face real and substantive penalties.
But what about an Arbitration?
An Arbitration, because of the consensual nature of this process, does not admit to such a mechanism unless the parties include a provision that in some manner mirrors the litigation context I have referred to.
In my view, the parties, or their legal representatives, should ask themselves when they formulate the “arbitration clause” in their agreements, “Should we first require our clients to submit to mediation before triggering an arbitration where an arbitral dispute arises”?
Depending on the nature of the disputes that are likely to arise in an agreement, an obligation to first try mediation gives the parties another tool in their tool kit to find a resolution before they need to resort to the expense of a full blown arbitration. Such a provision that would require the parties to submit in good faith to a mediation is perfectly consistent with the objectives of arbitration, widely recognized, which include finding a timely and inexpensive resolution to the parties’ dispute.
Requiring the parties to submit to mediation before arbitration will afford them all of the benefits that I wrote about in my prior article and, may in the end, save them countless hours in frustration and costs.
Some experts in the area are already discounting speed and cost saving as a benefit in arbitrations -certainly the more complicated ones- so having a mandatory mediation term included in the arbitration clause may be of even greater value to the parties.
The nature of the clause to be employed that engages mediation as a mandatory requirement to precede arbitration can be as creative as the circumstances warrant and the parties can agree.