Arbitration is often confused with mediation, which is an informal process of bringing in a third party who goes between the disputing parties to help them settle a dispute. Mediating is a voluntary process , and it's not binding on the parties The mediator meets with the parties for discussion, but the mediator does not impose a settlement. The mediator tries to bring the parties together by discussion and caucusing separate discussions. Typically, arbitration begins when two parties agree to settle their dispute through arbitration.
The decision may also have been made for them by the addition of an arbitration clause to a contract that both parties have signed. A typical arbitration clause in a business contract might look like this from the American Arbitration Association :.
Arbitrators are trained professionals who have expertise in specific areas of arbitration, including employment, labor, construction, commercial, and international disputes. The American Arbitration Association maintains a roster of arbitrators in these and other areas that the parties can use in selecting an arbitrator.
Arbitration may or may not be binding on the parties. In binding arbitration, the decision of the arbitrator is final and it can be upheld in a court. In non-binding arbitration, adherence to the decision is voluntary for both parties. Here's a general process for arbitration. If you want to arbitrate a case that involves a business or government outside the U.
You can start by reading this article on international arbitration and filing a request with an international organization like the International Chamber of Commerce. It's a common myth that lawyers aren't allowed in the arbitration process. You can even represent yourself if you want; this is called " pro se ," meaning on one's own behalf. A business can arbitrate pro se , with someone in the company representing that side.
Anyone is entitled to have an attorney but it isn't required. Arbitration, like litigation, is a final, legally-binding process that may impact your rights.
Consumers may not realize when their contracts with corporations are controlled by these clauses, and they tend to be unfamiliar with the arbitration process. Sometimes arbitration clauses are very detailed, governing the choice of arbitrator, the location of the arbitration, and the arbitration fee structure. Arbitration can be mandatory or voluntary, and the decision can be binding or non-binding.
Mandatory arbitration means that the parties must use arbitration to resolve any dispute, while voluntary arbitration means that the parties can explore other options for resolving their dispute before going through arbitration. By contrast, non-binding arbitration means that either side can reject the outcome and pursue litigation instead. The outcome of non-binding arbitration can become binding, though, if the two sides agree to accept it or fail to pursue litigation within a certain time as provided by the arbitration clause.
For a simple dispute, the parties may retain the services of an independent arbitrator. They can review the specific fees and background of arbitrators whom they find online or in the phone book.
However, an arbitration agreement often will designate a certain arbitration agency to resolve the dispute. Fees for arbitration agencies usually consist of a percentage of the amount in dispute, in addition to a case service fee paid at the outset.
These arbitrators tend to have a background in the legal profession, although not all of them do. You can hire your own lawyer to represent you during arbitration if the subject matter of the arbitration is important or if the amount of money involved is significant.
Most people do not hire a lawyer for an arbitration that involves only a small amount of money. Which law controls the arbitration is very important.
So certain jurisdictions are preferred for particular case types New York, for instance, is often the chosen law for financial disputes. Internationally, certain case types such as patent disputes are per se not arbitrable in some countries. Patent arbitration is allowed in the U. That is, a patent may not be wholly invalidated in arbitration. Royalty rights may be determined. While the law governing the contract provides default rules if the parties have not specified procedures for arbitration, the agreement is the foundational document granting an arbitrator power.
The agreement determines what conflicts may be arbitrated. All disputes between the parties? Only those arising out of or relating to a contract? Those with more than a certain amount in dispute? Those concerning a certain subject or department? Is the court to be involved in certain questions? It usually is, unless these are expressly assigned to the arbitrator by a delegation clause? What relief may the arbitrator award? What will be done about emergency relief, which the arbitrator lacks the ability to grant?
These are choices to be made depending on the needs and goals of the signatories. When we think of arbitration, we usually think of a close substitute for litigation — in which the arbitrator allows hopefully streamlined discovery and hears limited motion practice before holding the arbitral equivalent of a litigated bench trial. It is usually presided over by a retired judge or experienced lawyer. Most cases take place over several days or weeks of confidential sessions in a conference room.
This form of arbitration has grown in the last six or seven decades, as corporate litigants sought relief from the cost, delay, publicity, and disruption caused by bloated, take-no-prisoners lawsuits and unpredictable juries. Arbitration, some say, is the new litigation. Some users even characterize it as worse than litigating. But quasi-litigation is not the only form of arbitration. The practice was popular in the trade guilds and commercial fairs of medieval England.
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Grow Your Legal Practice. Meet the Editors. Arbitration Basics. Learn the basics about arbitration: what it is, when it arises, and how the process works.
What is Arbitration? Mandatory Versus Voluntary Arbitration An arbitration clause may make the arbitration either mandatory or voluntary.
Binding Versus Nonbinding Arbitration In binding arbitration, the arbitrator's decision is final. Choosing an Arbitrator Many arbitration agreements require that disputes be arbitrated through one of the big arbitration groups or associations. Independent Arbitrators You can locate independent arbitrators and find out their fees and philosophies by looking in the phone book -- or doing an Internet search combining "arbitrator" and your location. Getting a Lawyer's Help Parties sometimes hire attorneys to help them through the arbitration process.
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