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Arbitration and Meditation

Securities Mediation

What is Mediation and how does Mediation Differ from Arbitration

Mediation is an informal, voluntary process in which an impartial person, trained in facilitation and negotiation techniques, helps the parties reach a mutually acceptable resolution. What distinguishes mediation from other forms of dispute resolution-principally, arbitration and litigation-is that the mediator does not impose a solution but rather works with the parties to create their own solution. Mediated solutions often include relief not available in arbitration or litigation.

Mediation is flexible and creative. The actual process varies from case to case depending largely on the parties’ needs and the mediator’s style. Usually, the parties meet to discuss the issues face-to-face. The mediator helps the discussions remain focused and productive. Then, the mediator may hold private caucuses with each party separately, and will carry messages-clarifications, questions, proposals, offers, and counter offers-back and forth between them. The mediator uses the private caucus and other techniques to facilitate the negotiation.

Mediation is non-binding. The emphasis is on fashioning a solution satisfactory to all. However, if the parties cannot negotiate an acceptable settlement, they may still benefit from the process by narrowing the issues to be arbitrated or litigated.

Role as a Mediator

Division of Securities assists and guides the parties toward their own solution by helping them to define the important issues and understand each other’s interests. The mediator focuses each side on the crucial factors necessary for settlement and on the consequences of not settling. The mediator does not decide the outcome of the case and cannot compel the parties to settle.

The mediator can defuse hostile attitudes and remedy miscommunications. The mediator is a mirror of reality, who can help soften or eliminate extreme negotiating positions. Through the mediator, parties asses weaknesses in their own case and recognize potential strengths of the other side. The parties can more clearly view matters previously distorted by anger and emotion. 
NASD mediators are knowledgeable in the subject matter of the controversies. Within the privacy of the caucus, mediators can help each party analyze the strengths and weaknesses of its complete case. Most significantly, the mediator can explore creative and innovative solutions that the parties-caught up in adversarial negotiations-might never contemplate.

Benefits of Mediation

How Successful is Mediation/Arbitration?

Historically, parties settle most business disputes submitted to mediation/arbitration. Division of Securities attribute this to the parties’ control over the process, costs, and outcome. The parties approach the process with confidence, leading to successful resolutions. Approximately 80 percent of the cases in the NASD Mediation Program settle within a few weeks to a few months of the parties’ formal agreement to mediate.

Mediation is valuable even when the parties do not reach full settlement. Sometimes parts of a dispute are resolved in mediation, leaving fewer or less extreme differences to be resolved in arbitration or litigation. Gaining agreement on collateral issues can translate into significant savings of time and money for everyone involved.

The mediation process improves communications, narrows outstanding issues, defuses emotions, and defines areas of agreement. Through the mediation process, the parties and their representatives also learn where to focus their energies should arbitration or litigation become necessary. Therefore the parties’ future dispute resolution efforts become more efficient.

Negotiation of Settlement

Throughout the mediation process, the mediator will help the parties negotiate effectively. Efforts to reach a settlement through mediation will continue until: (a) the parties agree to a resolution and execute a written settlement; (b) the parties conclude that further efforts to mediate the dispute would be futile and declare the negotiations at an impasse; or (c) any party or the mediator withdraws from the mediation process for any reason.

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