Creating Effective Arbitration Agreements and Business Mediation Strategies

Arbitration and mediation can save businesses valuable time and money by resolving disputes outside of the courtroom. However, for alternative dispute resolution to be effective, businesses must ensure that they have enforceable arbitration agreements in place and skilled negotiators on their side.

Drafting an Enforceable Arbitration Agreement

Agreements to arbitrate have become commonplace in today’s business world. But that doesn’t mean that you should take them for granted. Drafting an agreement that will be enforceable and protect your best interests requires the assistance of a skilled attorney.

A well-drafted arbitration agreement should provide a roadmap for the arbitration process and minimize the risk of disputes along the way. One of the most important issues to address is what types of disputes must be arbitrated. For instance, the scope of arbitration provision may be drafted broadly to include “any disputes relating to or touching upon the breach, performance or interpretation” of an agreement. Alternatively, it may be limited in scope to exclude particular types of claims from being resolved by arbitration. Any vagueness or ambiguity regarding the scope of matters subject to arbitration can result in costly legal battles before arbitration even begins.

Other key provisions outline the logistics of the arbitration. For instance, the agreement should specify the substantive law governing the arbitration, which may differ from the law governing the broader contract between the parties. It should also establish the arbitral “seat,” which refers to the jurisdiction in which the arbitration is deemed to take place. Another essential clause should specify the number of arbitrators that will decide the matter and the applicable mechanism for their appointment.

Finally, it is imperative to make sure that all of the terms of the agreement are clear and straightforward and that the other party’s consent is abundantly clear. This is particularly true for arbitration agreements with employees and consumers, which are often subject to greater judicial scrutiny. For instance, any provision that waives the right to seek relief in a court of law must reflect that the other party has agreed clearly and unambiguously to arbitrate the disputed claim.

Developing Effective Business Mediation Strategies

Mediation can also be an effective way to resolve complex and sensitive business disputes. However, to get the most out of it, it is important to understand how the process works and what steps must be taken to ensure any resulting settlement is enforceable.

In mediation, a neutral third party helps negotiate the differences in the parties’ positions to lead to the settlement of all or some of the issues in dispute. The mediator’s role is to help the parties find common ground rather than make any binding decision regarding the dispute.

Like other alternative dispute mechanisms, business mediation offers several advantages over traditional litigation, such as being faster and cheaper than going to trial. Mediation sets itself apart from arbitration by its informality. It gives mediators the flexibility to propose creative solutions unconstrained by legal precedent. Additionally, unlike a judge or jury trial, mediation allows the parties to maintain control over the ultimate resolution and preserve the confidentiality of the proceedings.

Key Components of a Successful Mediation Settlement Agreement

For mediation to be successful, the parties must reach an agreement on the key issues in dispute. The agreement should be documented in writing, recording the parties’ responsibilities, obligations, and the compensation required as per the settlement. This written record serves to memorialize the agreement. The mediation agreement must also state that each party is receiving something of value in exchange for the promises made in the agreement, which is known as “consideration.”

While not essential to a binding agreement, below are several other key components of a mediation settlement agreement:

• Dispute Summary: A summary of the nature of the matter, including the facts and legal issues in dispute.
• Payment Provision: A description of the payments that must be made by one party to the other, as well as the schedule for such payments.
• Termination/Modification Provision: The circumstances under which the agreement may be terminated or modified by either party and the process for making any changes.
• Confidentiality Provision: A clause prohibiting the parties from disclosing the contents of the agreement to third parties.
• Governing Law: A provision setting forth the jurisdiction that will govern the interpretation and enforcement of the agreement.

Scarinci Hollenbeck Can Help Resolve Your Business Dispute

At Scarinci Hollenbeck, we work closely with our clients to determine whether mediation, arbitration, and other forms of alternative dispute resolution (ADR) can serve as a viable alternative to traditional court proceedings. When ADR is the best option, the attorneys of our Alternative Dispute Resolution Practice Group leverage their exceptional negotiation skills and decades of dispute resolution experience to resolve the matter quickly and efficiently.

To find out how to develop more effective arbitration agreements or use business mediation to resolve your disputes, we encourage you to contact one of our experienced ADR attorneys today.