Final Offer Arbitration Challenge



Final Offer Arbitration Challenge Video

 

In the September 2016 issue of the Harvard Business Review an article entitled “How to Make the Other Side Play Fair” has an interesting take on negotiation and mediation.

They discuss a process to make both sides to a dispute play fair and be reasonable in negotiations.

This process is the Fair Offer Arbitration Challenge and is a variation of a “High/Low” agreement or what is called a Texas Shootout clause in a buy/sell agreement.

Here is how it works: The parties agree to accept the decision of the arbitrator. The parties are then challenged each to present their best offer to the arbitrator. The arbitrator is obligated to pick either the demand or the offer and cannot mediate or otherwise compromise between the two numbers.

Instead of the parties proposing unreasonable numbers which are unlikely to be picked, the parties are rewarded by being reasonable and picking reasonable numbers with which they could live even if unhappily.

The riskiness of the proposition drives the parties toward agreement raising settlement rates.

According to the article, this technique was developed in major League Baseball disputes in the 1960s.

This could be used as its own ADR procedure or could be used by a mediator when the parties are at impasse instead of using a mediator’s proposal.

Food for thought. Good luck out there in resolving your cases.