Understanding the Similarities and Differences Between Arbitration, Mediation, and Conciliation in The United States and Italy

Understanding the Similarities and Differences Between Arbitration, Mediation, and Conciliation in The United States and Italy

Throughout life, it’s almost impossible to avoid disputes. These disputes can come in the form of a small issue that gets resolved quickly. On the other hand, other types of disputes aren’t so easy to solve.

In the past, two parties would fight for years, if not decades, in courtrooms trying to settle disagreements. While courtroom trials can resolve certain situations, most parties find this process is both time-consuming and financially draining. With that said, the legal needs of countries, companies, and civilians have changed considerably in the past decade.

Now, people are realizing it’s often much more advantageous to get the outcome they’re looking for through private agreements and negotiations instead of going through litigation in a courtroom. Considering that, many companies are turning towards alternative dispute resolution (ADR) methods to solve disputes in a fast, private, and cost-efficient manner.

The three main alternatives to litigation are arbitration, conciliation, and mediation. There are other, more particular, ADR processes which include early neutral evaluations, judicial settlement conferences, mini-trials, and summary jury trials.

Things can differ quite a bit when looking at how two separate countries carry out ADR processes. When looking at Italy and the United States, for example, these two countries’ policies can differ wildly. One of the main differences between these two countries is that Italy utilizes a civil law system; the United States utilizes a common law system. Despite these two countries’ fundamental differences in how they practice law and negotiations, both Italy and the United States firmly understand the importance of choosing to arbitrate.

For instance, mediation in the United States offers many advantages to resolving disputes that become unresolvable through other methods. Unfortunately, while mediation remains effective in the U.S., Italy is still working to implement it as a way to resolve disputes. One reason for this is because mediation is often accidentally confused with the process of conciliation and arbitration.

To help resolve any confusion, the ADR Times is taking a look at arbitrating, mediating, and conciliating separately. This includes learning how each of these ADR methods differs from one another as well as the similarities they share. By taking a closer look at each of these alternative resolution dispute methods, it’s easier to choose the right way to proceed with a disagreement.

Arbitration

By arbitrating, parties can utilize a popular method for resolving issues. To begin this process, all disputing parties present their situation to either a single arbitrator or a panel of private and qualified arbitrators. In each situation, an arbitrator is an independent third party that helps parties resolve disputes.

Choosing an Arbitrator or Panel

The Italian Civil Procedure Code (I.C.P.C.) § 806 states that conflicting parties can choose neutral arbitrators to oversee the resolution of a dispute, provided that these disputes aren’t designated to be taken care of within the court system.

When choosing a singular arbitrator, both parties typically make this decision by looking at each arbitrator’s experience and understanding in a specific type of law. For instance, throughout Italy, most arbitrators are either attorneys or law professors. When a group of arbitrators is chosen, it’s possible for both parties to agree on a singular arbitrator.

If all parties involved in a dispute can’t come to an agreement, each one will select a personal arbitrator from this group. After this, the chosen arbitrators appoint another arbitrator to serve as the panel’s president. The appointed arbitrator will not be one of the same individuals another party’s already selected.

The Disadvantages of Arbitrating

While arbitrating is often less expensive and more approachable than going to trial, this form of ADR does have certain disadvantages. One of these disadvantages includes rules specific to arbitrating that can lack formalities found in courtroom proceedings.

There’s also the potential issue of being willing enough to transfer decision-making power to an arbitrator or group of arbitrators. Also, parties choosing to arbitrate can be confined by traditional resolutions that don’t always involve creative or innovative dispute solutions.

Developing a Compromise Clause

When parties choose to arbitrate in Italy, proceedings often follow formal rules; however, these rules aren’t always as strict as those that govern litigation. Most disputes in Italy go through this process by including a clause into a contract that exists between these parties. I.C.P.C § 808 refers to this as a “compromise clause” or clausola compromissoria. This clause lists procedures that an arbitrator or panel of arbitrators must adhere to.

If a compromise clause doesn’t exist, all disputing parties must agree to have an arbitrator or panel of these individuals help resolve a dispute. The details of this type of agreement are found in I.C.P.C. § 808, otherwise known as a “compromise agreement” or compromesso. However, compromise clauses are often more popular than compromise agreements. This is due to the Italian legal system demonstrating the importance of inserting these clauses into contracts before disputes arise.

When arbitrators conclude this process, they issue an “award” or lodo arbitrale and sometimes an agreement for the sum to be deposited within 180 days from the date the arbitrator agreed to help resolve a dispute as mentioned in I.C.P.C § 820. However, how long it will take this process to conclude depends on a wide range of factors including what each party is wanting to achieve, the scope of the disagreement, and the skills of the arbitrator.

The Roles of Binding and Non-Binding Arbitration

In Italy, there are two main ways to arbitrate. The first method, binding arbitration or arbitrato rituale is similar to an enforceable, litigated judgment. The second method, non-binding arbitration involves an arbitrator issuing a final judgment that’s more like a contractual agreement. However, in the United States, parties don’t have to carry out an arbitrator’s final judgment unless they agree to do so.

While arbitrating in a non-binding manner in Italy, parties seek to obtain justice through a pronuncia secondo equita or “sentence of equity.” I.C.P.C. § 114 states that a sentence of equity states that a judge can, upon request, determine how to resolve a dispute based on principles of equity, provided these rights are available to all parties. If this doesn’t happen, a judge must make his determination based on the traditional principles of law as stated in I.C.P.C. § 113. While final decisions during this process are often enforceable by law, they don’t always set any type of legal precedent.

Other differences between binding and non-binding arbitration become evident during the processes of appeal. When determinations take place through binding arbitration or arbitrato rituale, parties can appeal the decision only when they wish to obtain revocation. I.C.P.C § 827 notes that, when appropriate, these appeals can happen by a third-party objection in front of a judge. This is a primary factor that can lengthen the duration of this ADR process.

Determinations made through non-binding arbitration or arbitrato non-ritulae differ slightly. This decision can only be appealed in limited cases that involve sentences enforceable by equity judgments. This appeal also has to be heard by new arbitrators, often costing more money as parties conduct new searches for these individuals.

In the end, the power given to arbitrators or panels is given by parties involved in a dispute. Fortunately, parties have control over how much power is given to them by creating contractual arbitration clauses. This allows parties to agree on how to resolve disputes through a simple process that’s similar, but not identical to litigated proceedings. As long as parties agree to proceed with registering an arbitrator’s decisions with the Italian Court of Appeal, this ruling carries the same value of any judicial judgment.

Mediation

Mediation is another critically important method for alternatively resolving disputes. This method involves a neutral third party, otherwise known as a mediator, utilizing a multi-stage process to help parties in a dispute reach a mutually beneficial and satisfactory resolution. Throughout this time, mediators help parties come up with their own interests, needs, and wishes for each other. Considering that, mediation is often seen as a more “peaceful” type of resolution tool than the previously mentioned dispute resolution methods.

The main goal of mediation is to help any disputing parties dedicate everything they have towards creating a durable, voluntary, and effective agreement. Throughout this process, each party reserves the right to either determine this agreement’s parameters or to stop the entire mediation process. Instead of going through traditional judicial proceedings, this type of alternative dispute resolution tries to bring parties together by having them find common ground.

By choosing to either arbitrate or mediate, parties obtain a higher level of participation than would be allowed in most traditional courtrooms. With that said, an arbitrator does have quite a bit of power when it comes to resolving disputes. In the end, parties have to accept an arbitrator’s ruling as if it was a judge’s official ruling. If a party chooses mediation, all parties can directly participate in the resolution process.

It’s important to note that any disputing parties can start working on mediating a disagreement at any time. A disagreement can reach mediation in several ways including consent of the parties, a court order, or through a contract’s mediation clause. With that said, disputing parties involved in a contract might need to submit a dispute to mediation according to the clauses in their contracts. Under this type of clause, parties often retain the right to select their mediators and to schedule the beginning of these proceedings on a date that’s mutually agreeable for everyone.

Selecting a Mediator

When it comes to selecting mediators, parties can choose individuals from a wide variety of professional and educational backgrounds. However, it’s helpful to include several mediators with some type of knowledge of a dispute’s subject matter. In the end, the success of a panel depends on how well they’re able to work together and come up with clear solutions.

Professional mediators possess a wide range of skills including those having to do with the legal system, economics, and resolving disputes. As parties are mediating, a mediator works to both facilitate a positive relationship between these groups and evaluate each aspect of their dispute. Also, mediators work to find mutually beneficial solutions, instead of focusing on any possible animosity that might exist between parties. A mediator’s fees vary based on this person’s hourly rate and how long they’re going to be meditating. Usually, all parties involved in this dispute split the mediator’s total costs.

Mediators also help all parties come up with final agreements to help put an end to any disagreements. A final agreement reminds parties of past grievances, confrontational periods, and helps to anticipate any possibility of future disputes. In most cases, a mediation agreement lists timetables that are realistic, specific, and achievable for all parties.

What Makes Mediating Advantageous?

Mediating is often more advantageous than going to court for most parties. The first advantage of meditating is that it’s often far less expensive than traditional litigation. No company, person, or country wants to spend more money than they have to while being involved in a courtroom dispute.

Another advantage of choosing to mediate is that attempts to resolve disputes as fast and efficiently as possible. This isn’t always the case in courtrooms, where disputes can take months or years to fully resolve. Therefore, deciding to mediate can help free up the schedule of many busy people. Choosing mediation often means wrapping up a dispute as quickly as possible.

Many parties prefer mediation because it allows them to express their interests and concerns in a direct manner. Most parties also enjoy that mediation allows them to develop a mutually beneficial outcome by creating unique strategies that meet everyone’s needs. Instead of making decisions or judgments, mediators use specialized communication and negotiation techniques to help each party reach an optimal outcome. Choosing to mediate is also beneficial because it takes into account the financial condition of all parties as well as any other extenuating circumstances.

How Arbitrating and Mediating Are Similar

In many ways, mediating and arbitrating are quite similar. For instance, both of these alternative dispute resolution methods involve access to justice, fair outcomes, the right to a speedy hearing, and keeping everyone out of litigation in a courtroom. With that said, most people find that mediation is much more time-efficient than choosing to arbitrate. For instance, certain mediation proceedings can come to a mutually beneficial close in just under three hours. With that said, the speed of mediation proceedings depends on many factors.

Most parties also consider mediation to be a more flexible negotiation method than choosing to arbitrate since mediators typically utilize a combination of resolution techniques. Having so many techniques to utilize can help provide resolutions using strategies no one previously thought of.

Differences Between Arbitrating and Mediating

One distinct difference of arbitrating and mediating has to do with choosing a neutral party. While choosing an arbitrator, parties look for someone that possesses certain legal skills and knowledge. Generally speaking, arbitrators use traditional legal principles to determine the outcome of a dispute. Therefore, arbitrators must be well-versed in their respective areas of the law.

Another difference between arbitrating and mediating is that the latter is more informal in terms of procedure and negotiations. Of course, both of these ADR methods are confidential as the parties choose a neutral party to discuss proceedings privately.

The Importance of Having a Confidentiality Agreement

Because it’s a relatively new process in Italy, parties need to sign a confidentiality agreement before any mediating process ends. The pre-mediation agreement carries the same weight as a binding contract. Throughout the United States, mediation is becoming one of the most predominant ADR processes because it allows parties the chance to develop practical settlements that are economical and practical.

The statements of any party during the mediating process are confidential unless they provide written content to do so. This degree of confidentiality also applies to any documents prepared for mediation. With such a high level of confidentiality, mediating creates an environment where all parties can discuss disputes without worrying whether their words might be used against them in the future.

Further discussing the confidentiality aspect of mediating, rules and customs can vary by country. In the United States, the confidentiality of statements made during the mediation is covered by law under California Evidence Code Sections 1115-1128.

Parties can also sign a confidentiality agreement before any mediating begins. This agreement acknowledges that any and all statements, as well as documents made for or during mediation, are confidential. It’s also important to note that confidentiality statements are inadmissible against any other party involved in this dispute during any subsequent civil proceeding.

The one general exception to the confidentiality rule is the mediated settlement agreement. A settlement agreement enforces terms in the event of non-compliance by any party involved in a dispute.

Vexatious Clauses

A party should also be on the lookout for vexatious clauses or clausole vessatorie, also known in the United States as “unconscionable.” If parties involved in a dispute can’t come to a settlement agreement through mediation, they can choose to arbitrate or litigate. However, mediation never deprives parties of a right to due process.

As stated in I.C.C § 1341, vexatious clauses are provisions in agreements that only disadvantages one party, usually the consumer. After the creation of these clauses, they need to be signed separately by each party. Without having each party sign the agreement separately, it can limit options and strip due process rights. While I.C.P.C. § 808 provides exceptions to the principle of natural jurisdiction, it has to be regarded as vexatious. However, contractual mediation clauses aren’t vexatious. This is because the parties can choose how they want to resolve a dispute, without worrying about any penalties.

That’s not to say that mediation isn’t only popular in the United States and Italy. Throughout the world, companies of all sizes are realizing how beneficial it is to choose mediation. According to international trends, the process of mediating is becoming one of the most preferred methods for both private commercial companies and government agencies to fulfill their objectives by resolving disputes in a way that is inexpensive, relatively quick, and saves business relationships.

During commercial disputes, deciding to mediate provides parties the chance to come up with innovative solutions that can further everyone’s interests in an analytical way. The solutions that arise as parties mediate also give companies broader rights than what they would have traditionally. This process also encourages parties to consider every aspect that’s making up their respective disputes, which is why it’s sometimes used to secure “business solutions to business disputes.”

Finalizing a Mediation Agreement

Before two parties begin meditating, they often put the exact terms of this type of agreement in writing. This helps create evidence that efforts are underway to resolve a dispute. A mediation agreement also serves as a reminder that all parties achieved some type of resolution while providing a clear endpoint to this situation.

If there is a dispute regarding compliance with a mediator’s final agreement or a party disputes this individual’s precise terms, this agreement serves as an enforceable contract. This also happens in situations where non-fulfillment of any contractual provision occurs. It’s rare for additional disputes to take place over mediated settlement agreements because the parties usually create the terms of this agreement.

In § 1965 of the Italian Civil Code (I:C.C.), it lists mediation agreements as types of transactional contracts. This type of contract involves parties attempting to resolve a dispute that’s taking place between them. During this same time, parties also work to resolve any potential disputes that might happen in the future.

For mediation to be effective, all parties must consider this dispute resolution method as a tool that everyone can use to directly manage disagreements. Instead of playing a possibly detached role during proceedings, mediating allows all parties to play a more direct and active role in resolving disputes. Mediating also encourages all parties to consider both legal matters as well as business interests as parties resolve disagreements. Something that makes mediating different from the other alternative dispute resolution methods is that any party can decide to end mediation any time if they believe it isn’t productive. Ending arbitration proceedings, on the other hand, requires approval from everyone.

Conciliation

Another popular way to resolve disputes involves conciliation, a process involving building positive relationships between parties having a dispute. With that said, it does have its differences when compared to mediating and arbitrating. This method is primarily employed by civil law countries, one of which is Italy.

Although conciliation is primarily used in labor and consumer disputes, judges in Italy encourage all parties to use this dispute resolution method. When conciliation is chosen, a “conciliator” begins working to help all parties come to a satisfactory agreement. Unlike arbitrating, the process of conciliating is much less adversarial in nature. Instead of spending time on disagreements, conciliating attempts to individualize the best solution, directing all parties towards coming to a common agreement that satisfies everyone.

The Similarities Between Conciliation and Mediation

Both mediation and conciliation aim to help fix lost balances of power between two or more parties. These methods also work well to help parties maintain their current relationship. During mediation, the mediator is in control of most of the proceedings while parties have more control of a dispute’s outcome.

When a dispute arises, parties will use conciliation as a type of preventative measure. Mediation, on the other hand, shares more similarities with arbitration because it attempts to stop a dispute that’s already started. Also, during conciliation, the conciliator doesn’t have to follow as much structure as a mediator might. Instead, the conciliator frames the conciliation process as more of a traditional negotiation.

Differences Between Conciliation and Mediation

It’s easy to confuse conciliation with mediation. However, there are important differences between these two types of alternative resolution dispute methods. When parties choose conciliation, the conciliator takes on a direct role in helping to resolve a dispute. This person also advises the parties on certain courses of action by making proposals for a settlement. While utilizing conciliation, it’s the conciliator who often creates the terms of a settlement. Before this happens, parties visit with a conciliator to obtain guidance about a dispute. After a conciliator makes proposals, the parties decide which type of proposal would work best for everyone involved.

Also, the role of a conciliator and mediator are quite different from one another. A mediator must be neutral at all times and doesn’t only focus on what constitutes a traditional notion of fault. Instead of taking sole responsibility for coming up with a solution, mediators work with each party in a dispute to help find solutions that are in everyone’s best possible interest. By facilitating discussion between all parties in a dispute, mediators help guide everyone to a fair and satisfying solution.

However, disputing parties become more involved in the mediation process than they would with most others. During the process of mediating, they help identify interests, come up with potential solutions, and decide on proposals from other parties. When mediation takes place, attorneys also help generate ideas for settlement solutions. However, during conciliation, they mostly offer advice to their clients after conciliators generate proposals.

Conclusion

Each of the three main alternative dispute resolution (ADR) methods provide benefits to parties involved in a dispute. These methods are also often seen as complementary to more traditional litigation. With that said, each one of these alternative dispute resolution methods has its disadvantages. Take time to consider the advantages and disadvantages of each alternative dispute resolution method. For more information on everything needed to resolve disputes, consider visiting ADR Times.

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Mark Fotohabadi
As Co-Founder & Publisher of ADR Times, Mark Fotohabadi, PhD, MBA, MDR is a visionary and hands-on serial entrepreneur and educator, who has successfully co-founded and led half a dozen companies to sustained profitability and disruptive change in their respective fields.Mark holds a Ph.D. in Leadership from Alliant International University; an MBA in Finance from Pepperdine’s Graziadio School of Business; a Master in Dispute Resolution (MDR) degree from the Straus Institute for Dispute Resolution, at Pepperdine Caruso School of Law; and a BSc degree in Urban & Regional Planning from Cal Poly Pomona.Mark can be reached at (800) 616-1202 xt 701; and via email: [email protected]