Mediation clause might be a lifesaver in contract

People with legal problems in Costa Rica should try mediation to resolve their issues. Arbitration and the courts are expensive and slow. Most contracts today include arbitration clauses by default, and they are signed without giving much thought to the process. Expats should not get locked in without doing some homework.

Here are the important points to consider before signing a contract with a section on arbitration:

1. If an arbitration clause exists in the document, one is locked in and must go to arbitration. if differences arise. If a lawsuit is filed before doing so, a judge will throw it out.

2. Consider the future. If there were a dispute, which court in Costa Rica would have jurisdiction? If it would fall in Puntarenas, for example, one of the slowest and most disorganized courts on the planet earth, arbitration would be the way to go.

3. Many contracts state three arbiters are required. Is this really necessary? If so, consider it is very expensive. One arbiter is more than enough in most cases.

4. Always add a mediation clause before arbitration or court.

Mediation is broadly known as, “A settlement of a dispute or controversy by setting up an independent person between two contending parties in order to aid them in the settlement of their disagreement.”

Elizabeth Morales Coto of CEDAD Asesores, an expert in mediation, touts the many benefits of the process. She said in an interview Saturday, “Mediation is a personal matter between parties in a dispute. It is not usually an easy process because individual feelings get in the way, but the right mediator can keep negotiations in focus and on track.”

Ms. Morales outlined the major benefits of mediation:

1. The process is generally much less expensive than arbitration or court.

2. Making a settlement is usually faster. People who negotiate their own settlements rather than have an advocate do so feel more empowered and in control of their lives.

3. Mutual decisions between individuals are better than win or lose outcomes.

4. Agreements tend to hold up over time with less hard feelings between parties. It can be a more amicable process if people are willing to give what it takes.

5. Mediation can take place anytime in a conflict. Even during a lawsuit. A great way to end something that is taking forever to solve by the courts.

She tells a story of two people fighting over an orange. They were ready to go to blows over the dispute. People can be pretty hot headed, she said as she related the outcome:  A mediator stepped in to find one person wanted the peel to make a cake and the other the juice. There was really no dispute. The individuals did not consider their interests in the fruit. They were blinded by the argument.

Ms. Morales said, “The first thing I do in any mediation is to meet the parties separately and have them make a list of their interests and possible outcomes to a disagreement. This can form the framework for the negotiations.” The process costs between $50 and $100 an hour in one- to three-hour sessions lasting no more than three months. No attorneys are involved until it is time to sign an agreement in most cases.

Marco Retana of Retana Law said that Costa Rica has two excellent laws to resolve disputes. Law 7727, the Law for alternative resolution of conflicts or in Spanish Ley de Resolución Alternativa de Conflictos, and Law 8937, the International Commercial Arbitration Act. The latter is based on the U. N. Commission on International Trade Law.

“It is crucial a person signing a contract with an arbitration clause understand what the process means and the costs involved,” Retana said. “In many cases it is better to go to court. In some, the process can take about the same amount of time and is a lot less expensive.” He added, if a dispute can be solved between parties in mediation before lawyers get involved, this is for best. Costa Rican law gives parties in a disagreement great ways to settle them.”

Here is an example of a mediation then arbitration with one arbiter clause for a contract. Mediation and arbitration centers can be replaced with other approved organizations:

“Any and all disputes, claims, differences, or controversies arising out of or in relation to any aspect of this Agreement, its business matter, performance, liquidation, interpretation, validity or any breach thereof, shall be resolved by a Conciliation or Mediation process involving an impartial person to attempt to reach a voluntary settlement in accordance with the bylaws of the CEDAD Asesores Center for Conciliation and Mediation. If the parties cannot reach an agreement through Conciliation, the conflict shall be decided by Arbitration in accordance with the bylaws of the International Center for Conciliation and Arbitration of the Costa Rican-American Chamber of Commerce (“CICA”) for which purpose only one (1) arbiter will be appointed and such arbiter shall be a lawyer duly authorized to practice law in Costa Rica; included on the above mentioned Conciliation Center’s lists. The parties hereby agree to submit voluntarily and unconditionally to its rules and bylaws and claim knowledge thereof.”

To replace arbitration with court, this section can be included: “If the parties cannot reach an agreement through Conciliation, it is agreed the agreement can be litigated through a judicial process.” 

Conflict is part of life.  Most people hate it and do their best to avoid or hide from differences. Philosophers believe it is the key component to growth and change.  A little help to move forward and solve conflicts never hurts. Trained professionals in coaching and mediation are the key to successful negotiations and positive outcomes. Mediators do not provide answers and rarely give advice. Their job is to give people the tools they need to help themselves.

Divorce and personal relationship problems are nasty. Costa Rica’s civil courts are stuck in the mud. Criminal courts here work for the crooks and not honest people. The bad guys love them.  To have a happy life in this country, it is best to avoid conflict at all cost. However, this is not always possible.

The key to doing so is to obtain good professional advice from the outset. There are over 20,000 legal professionals in Costa Rica. Many lack experience working with foreigners and do not know much about resolving disputes outside of court. Seasoned lawyers do.  They always say, “A bad settlement is better than a good lawsuit.” This simply means, it is better to settle out of court than risk going to arbitration or trial, where anything can happen.  Mediation can be the key to closure for a problem and the ability to move forward.

Garland M. Baker is a 44-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community.  Reach him at  Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica.  Find the collection at, a complimentary reprint is available at the end of each article.  Copyright 2004-2014, use without permission prohibited.

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