Q. What is the difference between a good priest and Peter at the Pearly Gates?
A. One is a mediator and the other is an arbitrator.
Most people do not know they can pick their arbitrator in Costa Rica if they know what they are doing.
A mediator is a person who can assist two or more persons to come to an agreement, but has no decision power one way or the other if they do not.
An arbitrator moderates disputes, but in the end can decide as to who wins and who loses.
Law 7727 of Dec. 9, 1997 is titled the “Ley Sobre Resolución Alterna de Conflictos y Promoción de la Paz Social,” or law of alternative resolution of conflicts and promotion of social peace. It is a significant and under-utilized set of rules to resolve conflicts and avoid the judicial system.
Good advice for living and doing any kind of business in Costa Rica is to stay out of the courts. The judicial system in this country is slow and inefficient.
Getting into a legal action in Costa Rica is like two kids throwing mud pies over a fence. One throws one pie, and the other tosses two. Usually, this goes on geometrically, making lawyers wealthy.
Law 7727 can keep people out of court and solve problems quickly. However, the trick here is to learn how to use it effectively. Some articles of the law do not work as designed. For example, the law states that in a conflict one can request the bar association or the Sala Primera of the Corte Suprema to appoint an arbitrator. However, several calls to both determined that neither put its part of the law to work.
Employees recommended calling the Ministerio de Justicia y Gracia where one can find a list of arbitrators.
All contracts in Costa Rica should have mediation and arbitration clauses in them. The resolution of conflicts center at the justice ministry's office provides a detailed list of approved mediators and arbitrators. These are referred to as justice centers.
Mediators are generally free or low cost, where arbitrators are not free, and their costs can jump all over the place. Some justice centers provide both mediation and arbitration, some only mediation and others only arbitration.
In mediation, a decision reached by the parties is binding and is as good as a judgment by the courts and is executable as such. The keyword here is parties. The mediator cannot make the decision. If there is no agreement reached in mediation between the parties to the dispute, the conflict then can go to arbitration or to court.
Good contracts include an arbitration clause to stay out of court after failed mediation.
In arbitration, parties pick representatives to plead their case in front of an arbitrator or arbitrators, referred to as an arbitration panel. The decision of the panel is final and again as good as a court judgment.
The secret that most people do not know is that articles 19 and 20 of the law states arbitration can be either by law or by equity. This means a contract can appoint an arbitrator or arbitrators in the event of a dispute, avoiding justice centers altogether. The arbitrator or arbitrators can be anyone, even people with no knowledge of law.
A great tip is to put mediation and arbitration clauses in employment contracts. Yes, even with domestic employees. They are constantly making proverbial mountains out of molehills at the expense of employers. When disgruntled employees go to court, employers generally lose. Employment contracts cannot take away any inalienable rights of employees, but contracts with the correct clauses can sure level the playing field and protect employers rights, much more so than the courts do.
In conclusion, wise expats will use contracts in Costa Rica to conduct business affairs, including buying or investing in property. They should put mediation and arbitration clauses in the contracts and appoint an arbitrator or arbitration panel in the contract to avoid justice centers.
Article first published in A.M. Costa Rica on December 26, 2006.
