Arbitration Article

Arbitration

What is ADR?

Alternative Dispute Resolution (or “ADR”) is the collective name for a number of different processes through which two or more parties who find themselves in a civil legal dispute can settle their disagreement without opposing one another in court. ADR is thus an alternative to traditional “litigation” in which one party (the plaintiff) sues another (the defendant). The best-known examples of ADR are negotiation, mediation, and arbitration.

What are the benefits of ADR?

ADR has several advantages over traditional litigation. ADR generally:

1. Costs a lot less
2. Takes a lot less time
3. Is less formal
4. Allows the parties to have a greater say over which other individual(s) will help them to settle their dispute
5. Allows the identities of the parties and the nature of their dispute to remain confidential
6. Allows for a wider range of issues to be considered
7. Allows for a wider range of possible resolutions to the parties’ disagreement

What is arbitration?

Arbitration is a type of ADR in which a neutral third person acts as a private judge of the dispute between the parties. (When more than one private judge is involved, the panel of private judges is known as a “tribunal.”) After hearing the parties’ arguments and reviewing the parties’ evidence, this private judge – commonly called an “arbitrator” but sometimes also called an “arbiter” – issues a decision. The arbitrator’s decision usually is legally binding (enforceable by the courts), but it can also be non-binding (only recommended) if that is what the parties have agreed to.

Arbitration itself is always the result of a voluntary choice by the parties – but the process can become “mandatory” (required) when the parties have agreed in advance to submit any dispute that may arise between them to arbitration. The same applies to whether the arbitrator’s decision will be legally binding or not.

How does arbitration differ from mediation?

Arbitration and mediation differ in two major ways. The first is that mediation rarely is (but can be) legally binding, whereas arbitration usually (in fact, almost always) is legally binding. The second is that whereas a mediator tries to help the parties to a civil legal dispute find a middle ground on which they can reach a mutually satisfactory compromise, an arbitrator remains completely removed from the settlement process and instead issues a decision that may favor one party over the other. This is why arbitrators are described as “private judges.” Just as parties often “win” and “lose” in litigation, they also often “win” and “lose” in arbitration.

When does arbitration typically occur?

Arbitration typically occurs when a civil legal dispute arises between two or more parties who have a contract – and the parties agreed when they formed that contract that any future dispute between them would be resolved through arbitration. An “arbitration clause” – a clause in a contract that requires the parties to resolve their disagreements through arbitration – is a common feature of labor contracts, commercial contracts, and consumer contracts. However, any individuals with any kind of civil legal dispute can always agree in writing – at any time – to resolve their dispute through arbitration rather than litigation.