Mediate or Arbitrate? Which Works Best for You?

To mediate or arbitrate. That is the question.

mediate or arbitrateRecording artists and their labels often get into disputes over their contracts, and when this happens there are typically three options: Litigate, mediate or arbitrate. Often it is best, and less costly, to avoid the first option, so, what is the difference between mediation and arbitration?

Any given recording contract may include a clause specifying whether, in the case of a dispute, the two parties will take the issue to an arbitrator. If arbitration isn’t the go-to option, then mediation is an alternative they may agree on. While both help the two parties settle their dispute outside of court, there are differences between the two, and so it is important to understand them before deciding which route to go in case of a disagreement. So will you mediate or arbitrate? Perhaps after reading, you’ll be able to make an educated decision.

Arbitration

The concept of a third-party arbitrator has been coming up in the news plenty in recent months due to the NFL’s headline-dominating Deflategate scandal, but arbitration processes are part of all sorts of agreements, including recording contracts. If an artist gets into a dispute with his or her label over the royalties for the musician’s latest album, and the contract calls for the dispute to go to arbitration in such cases, the conflict will go to a neutral third-party charged with making a decision. Whatever that ultimate determination is, it is typically legally binding.

Arbitration is often a better route than going to court because it is a faster process typically tailored to the specific clause in dispute. Additionally, when the two parties meet with an arbitrator their discussions are not required to be made public, which can prove beneficial to both sides.

Arbitration, however, still has its downsides. For example, typically there is a winner and a loser, just as there is when a disagreement is brought to court. One party will usually walk away from the discussions disappointed. Arbitration is also similar to going to court in that the talks usually move along in accordance with the law, due to the legally binding nature of the third-party arbitrator’s decision. There is less flexibility here than with mediation.

Mediation

Mediation may be desirable because, unlike arbitration, the process is more flexible and more prone to back-and-forth negotiation. It is more of a mutual discussion guided by a neutral third-party, than a presentation of evidence to an arbitrator. The less legally binding nature of mediation offers many more possibilities in terms of coming to an agreement. Since the two parties and the neutral mediator all have a hand in coming to an agreement, it can be crafted down to even the tiniest details. The unique proceedings of mediation also reduce the chance of damage to the relationship between the two parties, which can prevent further dispute down the road.
Due to the fact that all three parties are deeply involved in mediation, and the ultimate agreement can be much more detailed, this process is sometimes slower than arbitration. If both parties prefer a faster and more formal process, than mediation probably is not the way to go.
A recording contract may also call for both mediation and arbitration. In these cases, it would specify that if mediation does not result in an agreement that works for both parties, then the dispute should move to arbitration.

So will you mediate or arbitrate?

If you’re not sure whether to mediate or arbitrate when it comes to drafting a recording contract, contact an attorney who can help you further explore the advantages and disadvantages of each in your specific situation.

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Anthony R. Caruso is a business transactional attorney in New York and New Jersey with experience in structuring, negotiation and completion of legal deals involving business, entrepreneurs, athletes and performers.

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