When Arbitration Is Required, Should You Still Try Mediation First?

In commercial and construction contracts, arbitration clauses are now the norm. They appear routinely—tucked into the fine print of everything from service agreements to bylaws to multimillion-dollar joint venture deals. These provisions typically require that disputes be submitted to binding arbitration, bypassing the courts entirely.

When a dispute arises and the contract says you must arbitrate, is there any reason to consider mediation first? Actually, there is.

After decades working cases in courtrooms and alternative dispute resolution (ADR) panels—and now wearing the neutral’s hat full time—I’ve seen firsthand how early mediation can shift the trajectory of a dispute.

What makes mediation worth considering? Let’s take a closer look.

Arbitration May Be Mandatory—but Mediation Is Often Just Smart

Arbitration and mediation, though often lumped together under the ADR umbrella, operate on entirely different premises. Arbitration, even if less formal than a trial, is still a form of adjudication. One side wins, the other loses and the arbitrator’s decision is final. Mediation, on the other hand, is entirely voluntary. Nothing is forced; parties retain complete control over the outcome. The parties work with a neutral facilitator to try to reach their own deal.

Many people assume that if the contract requires arbitration, there’s no room for mediation. But that’s not how it works. Unless the clause specifically prohibits mediation (which is rare), parties can always agree to try it—either before or during the arbitration process.

In fact, many arbitration clauses include a “step” provision requiring the parties to try informal negotiation or mediation before filing for arbitration. Others don’t mandate mediation but suggest it as an option. Major providers like JAMS offer mediation services alongside arbitration and often encourage early resolution.

Why Mediate Before Arbitration?

There are several compelling reasons to do so.

First, arbitration can be expensive—arbitrator fees, expert costs, discovery, multiple hearing days and substantial attorney time. Mediation, by comparison, is fast and inexpensive. If it succeeds, both sides walk away having avoided months of preparation and tens of thousands of dollars in legal expenses.

Second, there’s the issue of time. Mediation can take place within weeks or months of the dispute arising. Arbitration often takes a year or more to conclude. For clients who want certainty or need to move on, time matters.

Third, mediation puts the parties back in the driver’s seat. In arbitration, you’re placing the outcome in someone else’s hands. Mediation lets you craft your own solution. That can be particularly important when the dispute involves an ongoing relationship—such as between business partners, homeowners and homeowners associations or family members in a closely held company. Preserving goodwill can be more valuable than winning.

Fourth, mediation can help narrow the case. Even if it doesn’t resolve everything, a good mediation can identify what really matters, eliminate side issues and streamline the arbitration that follows. You may settle some claims or agree on stipulated facts. That makes for a shorter, cheaper arbitration.

Finally, suggesting mediation can signal a collaborative mindset. Courts and arbitrators often look favorably on parties who make a good-faith effort to resolve disputes early. If fees are in play—such as under a prevailing party clause—that effort may be worth something when the arbitrator allocates costs.

Practical Considerations When Proposing Mediation

Timing can be everything. When proposing mediation before arbitration, it often helps to strike early—before positions have hardened and legal fees have escalated. A well-timed suggestion to mediate, framed as a mutual effort to manage risk and costs, is more likely to be received constructively than a last-minute attempt just before an arbitration hearing.

Also consider the tone and framing of the proposal. Rather than casting mediation as a retreat, it can be presented as a prudent business decision. For example, a letter might frame the proposal around protecting confidentiality, avoiding prolonged exposure or maintaining goodwill. Framed properly, it lets both parties come to the table without losing face or looking like they’re folding.

Selecting the right mediator is equally important. A neutral with specific knowledge and a background in arbitration can help the parties assess their risk realistically and guide discussions toward a pragmatic resolution. For disputes that are highly technical—such as those involving construction defects, software development or complex commercial transactions—look for a mediator with hands-on experience in the field.

Another strategy worth noting is the early exchange of position papers or summaries. While mediation is nonbinding, each side can submit a confidential statement to the mediator outlining their theory of the case and potential settlement parameters. These submissions, along with pre-session calls with counsel, help the mediator get traction faster.

Psychological Aspects of Early Mediation

Disputes aren’t just legal—they’re emotional. Especially in high-stakes or relationship-driven conflicts, feelings of betrayal, resentment or fear often drive party behavior as much as the legal merits. Mediation allows for a kind of human engagement that arbitration does not.

A skilled mediator can surface and address these emotional dynamics in a private, structured and respectful setting. Often, parties need to be heard before they can be persuaded. Mediation creates space for that. The flexibility of caucusing (speaking separately with each side) allows the mediator to reality-test gently and explore areas of compromise without the pressure of immediate concession.

Moreover, when a case is mediated early, before parties have invested heavily in a win-or-lose mindset, they may be more open to resolution. Counsel can also help by preparing clients for the process, setting realistic expectations and approaching the mediation as a problem-solving opportunity rather than a contest.

Judicial and Provider Encouragement

There is a growing trend among courts and ADR institutions to encourage mediation as a first step in resolving disputes —even when the contract says otherwise. In California, local Superior Courts routinely promote mediation as a first step in dispute resolution, and JAMS includes mediation as part of its streamlined procedures. In some venues and industries—such as construction, technology and employment—mediation is viewed almost as an expected preliminary step, even if it’s not mandated.

Providers also recognize that not every dispute should go to trial. JAMS, for example, offers early neutral evaluation and expedited mediation tracks designed to keep costs down and encourage early engagement. Many neutrals—including those who also serve as arbitrators—are amenable to facilitating these pre-hearing mediations.

Tailoring the Process

Finally, remember that mediation is flexible. The process can be adapted to suit the needs of the dispute. Short-form “deal-focused” mediations can be completed in a half-day for smaller matters. More complex cases may benefit from a multisession mediation or a hybrid format that combines elements of facilitation and evaluation. A virtual mediation is a practical and increasingly popular option for geographically dispersed parties or for matters that do not require in-person interaction.

Where there is a power imbalance between the parties, the mediator can take steps to even it out. Where discovery is lacking, the parties can agree to a limited exchange of documents to support a meaningful discussion. The process is what the parties make of it.

The presence of a mandatory arbitration clause doesn’t necessarily mean mediation should be off the table. When the stakes are high, the relationships are ongoing or the cost of a full arbitration is daunting, early mediation can be the off-ramp everyone needs.

As a mediator and arbitrator, I’ve seen disputes resolve in a single day that would have otherwise taken a year or more to adjudicate. I’ve also seen parties leave mediation with a clearer understanding of what matters most to them, even when no agreement is reached.

Handled with care, mediation becomes more than just a procedural detour—it’s often the most direct route to resolution. It’s a strategic opportunity. And in today’s dispute resolution landscape, that opportunity is too valuable to overlook.

Disclaimer: The content is intended for general informational purposes only and should not be construed as legal advice. If you require legal or professional advice, please contact an attorney.