Arbitration is one kind of alternative dispute resolution. Other kinds are mediation, settlement conferences, and negotiation. These methods of resolving disputes are designed to offer people the opportunity to settle their disputes and avoid going to court, which can be time-consuming and expensive.
In arbitration, the parties choose an impartial third party, referred to as the “arbitrator,” to hold an arbitration and make a decision. The arbitration is much like a court hearing in so far as each party presents their evidence, which can include the testimony of witnesses, and their arguments.
Much like a judge in a court hearing or trial, the arbitrator makes a decision that is usually meant to be final and binding on the parties. It is possible, under certain limited circumstances, to have an arbitration that would result in a decision that could be appealed to a court.
It is possible for the parties to an arbitration agreement to provide in their agreement that the arbitration decision can be appealed. If they do not, an arbitration is likely to be binding arbitration, and the losing party would not be able to appeal the arbitrator’s decision. In some cases, non-binding arbitration may be available.
An arbitrator may or may not be an attorney, and many retired judges serve as arbitrators. Sometimes arbitrators have experience with the subject of the dispute they hear. This could be advantageous. An employment law attorney, for example, may be effective in providing a fair and unbiased resolution to an employment dispute.
An issue can arise if the party who loses in arbitration and is ordered to pay the prevailing party money damages does not pay the arbitration award. In a court of law, a party who wins an award of damages in a civil lawsuit can enforce the award through existing legal procedures. This is not so clear in the case of arbitration.
However, the prevailing party in an arbitration may have to ask a court to confirm the award so that it becomes a judgment that is enforceable if the party ordered to pay does not do so voluntarily. In the arbitration, enforcement means obtaining confirmation of an award by a judge in a court of law, or the modification, or correction of an arbitration award by a court, and entry of a court judgment that reflects the award.
It is important to recognize, however, that entering into an arbitration agreement means that the party who might lose has to comply with the arbitrator’s decision and pay an award of damages if payment is ordered by the arbitrator.
What Is an Arbitration Agreement?
An arbitration agreement is an agreement in which the parties agree to resolve any disputes that may arise between them through arbitration instead of through a lawsuit in a civil court. It might be a contract or an arbitration clause that is only part of a larger contract. The agreement obligates the parties to use arbitration for any disputes that are covered by its terms.
An arbitration agreement means that the parties to it waive their right to sue in a civil court of law where they have access to a judge or jury and the right to appeal unfavorable decisions. Legally, parties are allowed to waive their right to access a court of law for many types of claims, including breach of contract, fraud, negligence and a range of other issues.
An arbitration agreement may contain other provisions regarding how the arbitration should proceed if one occurs. For example, a common provision is that the parties may choose an arbitrator from a list assembled by an organization such as the American Arbitration Association (AAA).
When Will a Court Enforce an Arbitration Decision in Virginia?
Courts generally enforce arbitration agreements as they look on them favorably. The Federal Arbitration Act (FAA) supports this policy of arbitration agreement enforcement. The FAA provides that written arbitration agreements are valid. They cannot be revoked, and they should be enforced. If an arbitration agreement is valid, a court is most likely to require the parties to use arbitration to resolve their disputes.
Virginia also has a policy of enforcing arbitration agreements.
An individual who has been asked to agree to an arbitration contract or a contract that has an arbitration provision should seek a Virginia lawyer consultation, because the contract or provision asks them to give up significant rights, e.g., the right to file a lawsuit regarding certain disputes. They should discuss with a Virginia lawyer what effect the arbitration agreement would have on their rights to access a court of law.
The FAA is the federal statute that governs arbitration in Virginia and in all other 49 states in the U.S. The FAA achieves the following:
- It regulates arbitrations within the territorial U.S. as well as maritime disputes.
- It applies to contracts involving commerce.
- It gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYCREFAA).
- It implements the Inter-American Convention on International Commercial Arbitration.
- The FAA and the NYCREFAA apply to a notably broad variety of awards.
The FAA and the NYCREFAA apply to the enforcement of most arbitration awards in the US. The FAA applies to arbitrations even if the contract containing the arbitration clause also contains a choice of law provision specifying that state law governs that contract.
What if an Arbitration Agreement Is Violated in Virginia?
If a party to an arbitration agreement were to refuse to participate in the arbitration of a dispute, should one arise, the other party would go to court to enforce the agreement and compel the party to participate in an arbitration. They would sue for breach of contract and could seek a contempt order or an injunction.
The Virginia Uniform Arbitration Act (VUAA) is the state law that regulates arbitration agreements and arbitration in Virginia. Generally, Virginia courts will enforce an arbitration agreement if it meets the requirements of the law in Virginia. One of the main requirements is that in their agreement, the parties clearly express their intent to consent to an arbitration agreement.
It is important to recognize that an arbitration agreement can only be revoked for the reasons that any contract can be revoked in Virginia. An agreement may allow either party to withdraw under certain conditions. It may specify a period within which a party may withdraw. It may require that notice be given. If this is the case, then one of the parties could withdraw, provided they comply with any and all conditions in the agreement.
Virginia law allows the rescission or revocation of a contract but only in certain limited situations. These usually involve cases in which one party was misled, possibly by fraudulent misrepresentations. Or if a party was coerced into entering into a contract or reasonably mistaken about its terms or conditions, they might be able to revoke it.
It would not be a simple matter to cancel a contract even for these legitimate reasons, and it would require evidence and possibly a lawsuit. That is why it is important to carefully consider the implications of entering into an arbitration agreement before doing it.
If a party that wins an arbitration is awarded damages and the losing party refuses to pay the award, the prevailing party may have to go to court, seeking the court’s confirmation of the award and render a court judgment that would be enforceable.
A party would want to have the help of a Virginia business lawyer if they need to go to court to enforce an arbitration award or otherwise seek to modify or appeal it. That is because the process could quickly become complicated and technical. A lawyer’s involvement would be necessary.
For example, if a party wants to enforce an award in Virginia, they must first determine which law would govern the confirmation process. It could be the FAA or the VUAA, and determining which body of law is the right one would be a technical legal issue.
Do I Need the Help of a Lawyer for My Arbitration Issue in Virginia?
If you are considering entering into an arbitration agreement, you want to consult a Virginia business lawyer. You give up significant rights when you enter into an arbitration agreement. While there are definite advantages in some cases to using arbitration as opposed to the civil legal system, in others cases, there may be disadvantages as well. You would do well to review the pros and cons with your lawyer.
If you have entered into an arbitration agreement, and have a dispute that must be resolved through an arbitration, you also want to talk to a Virginia business lawyer. Your interests are at stake. Choosing the right arbitrator and making your best case are important. You are most likely to obtain the result you want with a lawyer’s help.
