Arbitration
Arbitration is a form of alternative dispute resolution (ADR) that allows parties to settle legal disputes outside of the traditional court system. In this process, both parties agree to appoint one or more arbitrators who hear the case and make a binding decision, known as an arbitral award. This method is often chosen for its efficiency, as arbitration hearings are generally shorter and less formal than trials, allowing disputes to be resolved more quickly. Additionally, the arbitration process often provides confidentiality, keeping the details of the case and the decision private, which can be appealing to many parties.
However, arbitration has its drawbacks. The decisions made by arbitrators are typically final and cannot be appealed, which means that parties may have limited recourse if they disagree with the outcome. Furthermore, arbitration clauses are commonly included in contracts, sometimes without consumers fully understanding their implications, binding them to arbitrate disputes instead of pursuing litigation. Due to its various applications across industries—from labor disputes to consumer issues—arbitration has grown in popularity as an alternative to litigation, providing a different avenue for resolving conflicts.
Arbitration
Arbitration is a form of alternative dispute resolution (ADR), or a method of resolving legal disputes without litigation, or use of the judicial system. In arbitration proceedings, arbitrators, or individuals chosen to settle the dispute, hear the facts of the disagreement between the two parties and make a final decision.
How Arbitration Works
As a form of alternative dispute resolution, arbitration allows parties to resolve issues without going to trial. For arbitration to be legal, both parties must agree to arbitrate the decision rather than go to trial. Sometimes, this agreement is written as part of a contract; by signing the contract, the parties agree that differences will be resolved through arbitration rather than in court. In arbitration, both parties must also agree on the arbitrator(s). Sometimes, the arbitrator is named or identified in the original contracts. At other times, the two sides may agree on a single arbitrator or they may request a panel. When a panel is required, each side chooses a single arbitrator and then the two chosen individuals elect a third party to complete the panel. The goal is for the arbitrators to be viewed as objective and neutral so that both parties feel their interests have been represented.
It is important for the two sides to agree on the arbitrators because the decision is considered binding, or final, and cannot be appealed. That means by virtue of agreeing to settle the dispute using arbitration, the two parties are also agreeing to abide by the decision that is made.
Arbitration hearings are conducted similarly to miniature trials. Both parties generally have legal representation (lawyers) who are allowed a limited amount of discovery, or the formal process of exchanging information about the case. Both sides can submit evidence, or elements that prove or disprove the case. Evidence may be limited, depending on the terms of the arbitration agreement, but usually includes witness testimony, expert testimony, documents of different kinds, photographs and other graphics, and videotapes. Each side is allowed to cross-examine the witnesses or experts presented by the other side.
Arbitration hearings are usually much shorter than trials. They may last a day, a few days, or even up to a week. Unlike the conduct of a trial in a courtroom, the panel only meets for a few hours per day rather than for whole days at a time. Once the proceeding is complete, the panel deliberates (carefully considers and discusses) and issues a written decision. This is called the arbitral award. The arbitral award is binding on both parties, meaning they must abide by the ruling.
Advantages
Litigation in the justice system is generally a lengthy and time-consuming process. Depending on the matter at hand, it may be weeks, or even years, before a final decision is reached. It is also quite costly, as legal representation is paid by the hour and many hours are required to conduct discovery, compile evidence, and file documents with the court.
Additionally, people involved in a lawsuit must miss work, school, and other life events to be present at the court when necessary. An actual trial may continue for weeks until the matter is considered ready for a decision. Finally, there is no guarantee of a positive outcome; the judge or jury may decide for or against the litigant.
For these reasons, alternative dispute resolution methods such as arbitration are popular. ADR proceedings generally move much more quickly, as they are not dependent on being scheduled onto a court calendar or meeting court rules. Although preparation time is still required, it is usually a shorter period, and the actual arbitration hearing may be over in a day or a week.
Additionally, some litigants may believe that they are getting more fair treatment since they have a voice in choosing the arbitrator(s). They may believe that this party is more neutral than those who might be involved in a courtroom trial.
Finally, arbitration hearings and opinions rendered are not a matter of public record. That means the terms of the decision will be kept confidential and not made available to the public unless both parties to the agreement choose to share it. Many companies and even private individuals feel more protected knowing that their business is not readily available to people who are not directly involved in the situation.
Disadvantages
Unless the arbitration decision is made in a hearing that is classified as "nonbinding arbitration," any decision is binding on both parties. Parties to the settlement do not have recourse to ask for an appeal or to ask a judge to overturn the decision, even if they disagree with the outcome. The decision itself is enforceable by the court.
Additionally, since many consumer agreements include arbitration clauses, consumers may be bound to arbitration without realizing it. Today, arbitration clauses can be found in all types of agreements from employment documentation to securities trading agreements to consumer contracts. For example, arbitration clauses may be buried in the fine print on agreements for credit cards, health insurance, and major purchases such as a financing agreement for an automobile. Consumers may not understand that by signing such contracts, they are agreeing to resolve any disputes through arbitration rather than through the court system.
Popularity
For many years, arbitration has been a popular method of resolving disputes in industries as diverse as labor, construction, and securities regulation. However, due to the advantages offered, arbitration has been gaining popularity for other types of disputes, such as those involving consumer credit, healthcare, and employment issues.
Bibliography
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Weiss, Debra Cassens. "Debt Buyers Use Courts to Collect Debt, Then Cite Arbitration Clauses to Deflect Legal Challenges." ABA Journal, American Bar Association, 23 Dec. 2015, www.abajournal.com/news/article/debt‗buyers‗use‗courts‗to‗collect‗debt‗then‗cite‗arbitration‗clauses‗to‗def. Accessed 10 Dec. 2024.
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