July 24, 2013 -- As the cost of litigation rises, parties are increasingly turning to alternate means of settling disputes in order to stay away from the cost of the courthouse. Arbitration and mediation are being used to resolve everything from multi-million dollar business disputes to much smaller consumer complaints. Visiting Assistant Professor Tasha Willis, director of the University of Houston Law Center’s Alternative Dispute Resolution program and supervisor of the Mediation Clinic, wrote “Arbitration Comes to Texas,” the lead article in the Spring edition of the Journal of the Texas Supreme Court Historical Society. Far from a recent innovation, arbitration has been a part of the Texas justice system for at least two centuries, a carryover from early Spanish jurisprudence. Willis took a few moments to provide a general overview to questions about the similarities and differences between arbitration and mediation.
Q.) What exactly is arbitration? Is it court-ordered or mutually agreed upon by parties in a dispute? How does it differ from mediation?
Mediation and arbitration are aimed at achieving a voluntary resolution to a conflict or dispute. The difference between the two methods lies in the process used to achieve this goal and the final result at the end of the day. However, the most elementary distinction is that arbitration is a binding process and mediation is a non-binding process. Both processes may be court ordered, contracted for, or mutually agreed upon.
Arbitration is a process in which both sides present their case before an arbitrator (or panel of arbitrators) and are bound by the decision (award) rendered by the arbitrator. Mediation is the process by which a neutral third party (the mediator) facilitates communication between two or more conflicting parties to promote reconciliation, understanding, and/or settlement. In Texas, as well as the rest of the country, mediation is an effective tool for resolving civil (not criminal) disputes. Other countries utilize mediation in criminal matters through victim/offender mediation. Mediation provides disputing parties with the opportunity to present their side of a dispute or conflict to a neutral third party mediator in a neutral forum. The mediator is charged with facilitating communication, reframing party statements, and working with both parties to reach a settlement agreement. Unlike an arbitrator, the mediator will never render an award or bind the parties to any agreement. If the parties to mediation reach a settlement, they may be bound by the terms to which they have agreed.
In general, if a mediated settlement agreement meets the requirements of § 154 of the Texas Civil Practice and Remedies Code a party is entitled to judgment on the mediated settlement agreement. Section 154.071 provides:
EFFECT OF WRITTEN SETTLEMENT AGREEMENT.
(a) If the parties reach a settlement and execute a written agreement disposing of the dispute, the agreement is enforceable in the same manner as any other written contract.
(b) The court in its discretion may incorporate the terms of the agreement in the court's final decree disposing of the case.
(c) A settlement agreement does not affect an outstanding court order unless the terms of the agreement are incorporated into a subsequent decree.
The parties who make an agreement may also have it enforced by the court if the parties comply with the requirements of Texas Rule of Procedure 11, which provides:
Rule 11-Agreements to Be in Writing (1988)
Unless otherwise provided in these rules, no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.
Once final a judgment is entered by the court; the court’s judgment on a mediated settlement agreement is subject to appeal.
Most arbitration awards, on the other hand, are not subject to appeal. However, if the award is not honored, a party may file a petition to make the award a judgment of the court. The court is limited only to the granting or denial of the entry of award as a judgment. The only appealable matter in an arbitration is the decision of the judge to grant or deny the entering of the judgment on the award, which may or may not be based on some action taken by the arbitrator.
Q.) Will arbitration and mediation continue to grow as less expensive alternatives to filing suit?
The resolution of disputes has moved from a public justice system (the courthouse) to a private justice system. The modern court room is the offices of mediators and arbitrators. Although arbitration continues to be challenged as being more expensive than litigating at the courthouse and as unconscionable in consumer contracts, it is considered to have advantages that will continue its growth in the future as it adapts to accommodate the needs of the contracting parties. Mediation has become the modern ADR procedure of choice because it is informal, can be scheduled and completed quickly, is highly successful, and is relatively inexpensive. If the future of arbitration is bright, the future of mediation is brilliant.
Professor Willis recently completed a multi-year program to earn an LL.M. degree with high honors in Transnational Commercial Practice with an emphasis in alternative dispute resolution. The program, offered through Lazarski University in Warsaw, Poland, was taught in Salzburg, Budapest, and Warsaw by faculty from Lazarski University, Boston University, Salzburg University, and the Center for International Studies. Willis is also a member of the Texas Mediator Credentialing Association Board and the Houston Bar Association Alternative Dispute Resolution Board.
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