What Is Med-Arb And Arb-Med?

Med-Arb and Arb-Med are hybrid dispute resolution processes that combine both mediation and arbitration, offering parties the flexibility of negotiation and the finality of arbitration. These methods are designed to streamline the dispute resolution process, allowing parties to resolve conflicts more efficiently and with less formal litigation. However, the two processes differ in their sequence and the role of the mediator and arbitrator.

Med-Arb and Arb-Med Explained

Med-Arb (Mediation-Arbitration):

In the Med-Arb process, the parties begin with mediation, a non-binding process where a neutral third-party mediator helps the disputing parties negotiate a resolution. If the mediation is unsuccessful or if the parties are unable to reach an agreement, the dispute moves into arbitration, a more formal and binding process where an arbitrator makes a final decision.

Steps in Med-Arb:

• Mediation: The parties first attempt to resolve their dispute through mediation. The mediator assists in facilitating discussions and helping the parties reach a mutually agreeable solution. The mediation is non-binding, meaning the parties are not obligated to accept the mediator's suggestions.
• Arbitration: If mediation fails, the matter is referred to arbitration. The arbitrator will review the case and issue a binding decision, which the parties must accept.

Key Characteristics of Med-Arb:

• Non-binding mediation precedes binding arbitration.
• If mediation fails, arbitration becomes the next step.
• This method is often used to reduce the time and costs associated with litigation, as it allows for an expedited resolution.

Arb-Med (Arbitration-Mediation):

In Arb-Med, the process starts with arbitration, where the parties present their case to an arbitrator who may issue a preliminary decision or award. If the parties are unsatisfied with the interim decision or want to explore a settlement, they may then proceed to mediation to try to resolve the dispute amicably. This approach allows for a binding arbitration decision if mediation does not succeed.

Steps in Arb-Med:

• Arbitration: The dispute begins with arbitration, where the arbitrator reviews the evidence, listens to the arguments, and may issue a preliminary or partial award to help clarify the issues at hand.
• Mediation: If either party is dissatisfied with the interim arbitration award or wishes to settle the matter amicably, the dispute moves to mediation. The mediator helps the parties negotiate a mutually acceptable resolution. The mediation is non-binding, and if it fails, the arbitration decision remains final.

Key Characteristics of Arb-Med:

• Binding arbitration precedes non-binding mediation.
• The process starts with arbitration to establish a legal framework for resolving the dispute.
• The mediation phase allows the parties to explore settlement options before fully committing to arbitration’s final award.

Key Differences Between Med-Arb and Arb-Med:

Sequence of Processes:

• Med-Arb starts with mediation, and if that fails, it transitions to arbitration.
• Arb-Med starts with arbitration, and mediation follows only if the parties seek to resolve the dispute amicably after a preliminary arbitration decision.

Role of the Arbitrator and Mediator:

• In Med-Arb, the same person can serve as both the mediator and the arbitrator (though they usually have to remain impartial when transitioning from one role to another).
• In Arb-Med, the mediator and arbitrator roles are more likely to be handled by different people.

Decision Finality:

• In Med-Arb, arbitration is always the fallback option, making it the final and binding decision if mediation does not work.
• In Arb-Med, arbitration is the primary method, but mediation serves as a secondary attempt to resolve the dispute, and the final arbitration award remains in place if mediation fails.

Flexibility and Approach:

• Med-Arb can be seen as a preventive approach, with parties first attempting a collaborative resolution before moving to a formal binding decision.
• Arb-Med offers a corrective approach, where parties try to solve the issue through arbitration before seeking a cooperative resolution in mediation.

Advantages of Med-Arb and Arb-Med:

Efficiency:

Both processes can significantly reduce the time and cost of dispute resolution by combining both mediation and arbitration, especially in complex or multi-party disputes.

Flexibility:

Med-Arb allows parties to attempt to resolve their dispute amicably through mediation before resorting to a binding decision in arbitration. Arb-Med, on the other hand, allows parties to explore mediation after an initial arbitration decision, keeping the option for settlement open.

Preserving Relationships:

In Med-Arb, mediation offers the opportunity to preserve business or personal relationships by reaching a cooperative solution. Arb-Med provides a second chance for mediation to work after an arbitrator has laid out the facts.

Cost-Effectiveness:

Since both methods avoid the need for prolonged litigation, they can save parties significant amounts in legal fees and other costs associated with court procedures.

Challenges and Risks:

Confidentiality:

There may be concerns about confidentiality, as information shared in mediation might be used in arbitration (especially in Med-Arb). It is crucial for the parties to agree on confidentiality rules before starting the process.

Inconsistency:

Switching between mediation and arbitration may create inconsistencies in the approach, especially if the mediator and arbitrator are different individuals. This could potentially confuse the parties or lead to mixed messages.

Conflict of Roles:

In Med-Arb, the same individual may switch between the roles of mediator and arbitrator, potentially compromising their impartiality. In Arb-Med, there may be conflicts over whether the mediation should override the arbitration decision.

Example:

Suppose two companies, Company A and Company B, are involved in a contract dispute over payment terms. Their agreement includes a Med-Arb clause.

Steps to resolution:

Mediation:

The companies begin by trying to resolve the dispute through mediation with a neutral third party. The mediator facilitates discussions and helps them work toward a resolution.

Arbitration:

If the mediation is unsuccessful, the matter moves to arbitration, where an arbitrator issues a binding decision on the dispute, resolving the conflict.

Alternatively, if the contract included an Arb-Med clause:

Arbitration:

The companies begin by presenting their case in arbitration, and the arbitrator issues a partial award.

Mediation:

After receiving the interim arbitration decision, the companies proceed to mediation to try to settle the matter amicably. If mediation fails, the arbitration award stands as the final decision.