Arbitration is a process used by parties to resolve legal conflicts or disputes between them. Sometimes, the parties can voluntarily agree between themselves to submit to arbitration. In other cases, arbitration is mandatory. Certain agreements, including employment agreements, often contain language requiring that disputes be arbitrated.
Generally, arbitration is conducted by an individual known as an arbitrator. This individual is a neutral third party who listens to the parties’ claims and then makes a decision as to those claims, in the form of an arbitration award.
Certain disputes cannot be arbitrated, because state or federal law requires litigation of some matters. For example, disputes over whether a crime was submitted must be addressed through the court system.
However, most disputes between private parties can be arbitrated. Examples of disputes that can be arbitrated include contract disputes as well as commercial disputes (disputes between businesses).
Certain disputes must be submitted to arbitration because the agreement the parties entered into may mandate the use of arbitration. An example of this is a contract or an employment agreement. The terms of mandatory arbitration are spelled out through a provision in the agreement called a mandatory arbitration clause. The arbitration clause typically requires a party seeking to resolve a dispute first try to resolve it through arbitration.
If parties voluntarily agree to arbitration, they then select a mutually-agreed-upon arbitrator from an arbitration organization, such as the American Arbitration Association. The arbitration organization provides rules for how matters are to be arbitrated. Individuals who must choose an arbitrator may evaluate the credentials of different arbitrators. Typically, credentials of arbitrators, as well as fees, are listed on the organization’s website.
In mandatory arbitration, the arbitration clause typically names the arbitration organization to be used, and describes the procedure to initiate arbitration proceedings. The procedure generally consists of the party who wishes to arbitrate serving a notice to arbitrate to the other party, who then responds. Once that happens, the arbitrator is chosen and the arbitration hearing is then held.
Arbitration proceedings differ from litigation in a number of aspects. Generally, arbitration is a less expensive process for parties. Arbitration disputes tend to be resolved more rapidly than to disputes that go to trial, even those in which a party is represented by a lawyer. In addition, the process of formal discovery, through which parties in litigation must go, is generally relaxed in arbitration proceedings.
Arbitration proceedings typically offer a simplified discovery process. Also, the rules of evidence in arbitration proceedings are often generally more relaxed than in litigation. For example, in many arbitration proceedings, evidence that is not admissible in litigation (because, for example, the evidence is inadmissible hearsay), may be used. The relaxation of the rules is designed to promote a faster, more efficient process.
Once the arbitration hearing has concluded, the arbitrator considers the evidence each side has submitted. After evaluating the evidence, the arbitrator issues a decision known as an arbitration award. In the award, the arbitrator indicates what each party is entitled to.
Often, the arbitrator will find in favor of just one party, and the award will provide only that party with relief. In some instances, however, the arbitrator will find that both parties’ claims have merit, and will render an award that grants each party some measure of relief.
Generally speaking, a party may not appeal a lawfully rendered arbitration decision. The mere fact that another arbitrator, upon examining the same evidence, might have reached a different conclusion, is not sufficient grounds for setting an arbitration award aside.
Nonetheless, there are some narrow circumstances under which an arbitration award can be appealed to a court, and set aside. An arbitration award may be set aside when:
- The arbitrator lacked the jurisdiction to render the award. A court may find jurisdiction is absent when, for example, the subject matter of the dispute is not something that can be arbitrated;
- The dispute in question is not covered by a valid arbitration agreement. An example of when a dispute is not covered by a valid arbitration agreement is when the arbitrator rules on an issue the parties did not agree to have arbitrated;
- The arbitration proceeding was tainted by fraud; or
- The arbitrator engaged in misconduct that affected the arbitrator’s decision.
If you wish to arbitrate a matter, or if an arbitration clause requires that you do so, you may wish to consult with a lawyer. An experienced arbitration attorney can review the facts and circumstances of your dispute, advise you how to prepare for arbitration, answer questions about arbitration, and represent you at the arbitration hearing.