Arbitration is a process in which a neutral third party, the arbitrator, is chosen to make a decision or award in a dispute. Arbitrators are people with expertise in a particular field and are chosen by the parties. In addition to choosing the arbitrator, the parties decide in advance what the issues are that will be resolved in the arbitration and the scope of the award. The arbitration hearing is private and usually held in a conference room rather than a courtroom. The arbitrator’s decision or award is made in writing and unless the parties have decided in advance that the decision will be merely advisory, the award is enforceable in court. In an arbitration, each party presents their side of the case and testimony of witnesses and experts may be offered. The parties control the process and so the process is generally less formal and more flexible than if the case were in court. So, arbitration sessions might take place at the site of the dispute or in the evening and testimony might even be taken on the telephone. Arbitration is most effective in cases where the parties are unable to agree on the facts, where the dispute is largely about money, or where the matter is highly technical and expertise in the field is necessary to render a decision.

Frequently Asked Questions

What types of disputes do arbitrators handle?

Subject areas commonly arbitrated include class actions, commercial, construction, employment, labor, energy, healthcare, insurance, intellectual property, internet, real estate, securities and wills and trusts. Parties through their attorneys may wish to submit a case to an arbitrator for various reasons, speed and economy being two. In other situations, the parties have signed a contract agreeing to arbitrate a matter.

What type of training do arbitrators have?

Most arbitrators have subject matter expertise in the area of the dispute. Arbitrators come from a wide variety of professions and fields. Arbitrators maintain their knowledge of the field by attending seminars and conferences on a regular basis.

How much does arbitration typically cost?

The cost of arbitration varies depending on the choice of neutral (the arbitrator), the complexity of the matter, and the adversarial nature of the parties. Private arbitrators may ask parties to provide a retainer for the matter and reserve a number of days for a hearing. Some arbitrators are selected through an organization, such as the American Arbitration Association, a public-service, not-for-profit association that provides mediators and arbitrators to parties in a dispute. The arbitrators are independent and set their own fees. Generally, arbitration is more expensive than mediation because arbitrators often are asked to review documents, deposition summaries, and briefs in advance of the hearing. This time is charged to the parties.

What is the difference between arbitration and mediation?

The primary difference is that a mediator does not make a decision or award, an arbitrator does. A mediator is a neutral third party who helps facilitate communication between the parties to help them reach their own agreement. The mediator helps the parties identify options for resolving the dispute but the parties themselves reach agreement on how they wish to resolve the dispute. In arbitration, the neutral third party called an arbitrator is chosen by the parties to hear evidence and make a decision in the matter. Sometimes, disputes are heard by a panel of three arbitrators. The arbitrators do not meet with any of the parties privately, unlike mediators who may meet separately with each party in a meeting called a "caucus," the goal of which is to collect additional information which may contribute to resolving the matter. Typically, arbitrators listen to an adversarial presentation of all sides of the case and reach a decision called an award. Strict adherence to court procedure and evidence is slightly relaxed in arbitrations although there are rules to the process. Usually, attorneys are involved but it is not mandatory. In mediation, often parties choose not to involve attorneys. If parties have contracted in advance, the arbitration award is binding on the parties. Otherwise, the arbitration may be non-binding. In mediation, if an agreement is reached and the parties sign the agreement, the parties agreement is enforceable.

What are the advantages of arbitration?

Speed is one major advantage of arbitration. The court process can be very time consuming with the increase in the number of criminal and civil cases, tight budgets and other factors contributing to delays of years to bring a case to trial in many jurisdictions. And, with appeals, the time is even greater. In arbitration, there is no line in which you have to wait until your matter is called.

Also, parties have their choice of neutral to hear a dispute. Parties in a construction industry dispute, for example, may select an architect, a contractor or a lawyer with background in construction law to serve as their arbitrator. Because of the specialized knowledge many arbitrators have, the parties are not required to spend as much time educating the arbitrator about industry practices and customs. This can be an advantage.

Informality and flexibility are qualities many people enjoy in the arbitration process. Each party is able to tell its side of the story to the arbitrator in an atmosphere less formal than a court proceeding. Rules of evidence are relaxed.

Privacy is often a key concern. In arbitration and other ADR processes, matters are not open to public scrutiny. Hearings and awards are kept private and confidential which helps foster positive working relationships.

When time is saved, so is money making the process much more economical. Arbitration is more streamlined and more informal than litigation. The filing of motions can be managed or eliminated.

Lastly, arbitration awards are final, binding and legally enforceable, subject to limited review by courts. If parties choose to have an award be non-binding or advisory only, they are offered that option