The Basics of Arbitration

If you have ever entered into a contract, you most likely have seen a clause that says something to the effect of “any controversy or claim arising or related to this contract shall be resolved by arbitration…” These are arbitration clauses and they appear in virtually any kind of agreement, from securities trading and employment agreements to consumer contracts such as for credit cards, health insurance, cellphones, and automobile purchases. Arbitration clauses simply require that a dispute between the parties be resolved outside of court. In most cases arbitration is binding, so it is important to know what arbitration is and how it works.

What is Arbitration?

Arbitration is the submission of a dispute to a neutral third party designated by the parties to the controversy (called an arbitrator), who agree in advance to adhere to the arbitrator’s decision. Simply put, arbitration is way of resolving disputes—typically quicker and cheaper than litigating in court. Arbitration is one of many forms of alternative dispute resolution. Arbitration can be voluntary or mandatory. Parties may agree to arbitrate even if there is no contract or no provision in a contract to arbitrate; however, parties may also be bound by law to arbitrate. Arbitration may be binding or nonbinding. A binding arbitration means the arbitrator’s decision is final, and the parties to the arbitration must adhere the decision even if they don’t like it. However, if arbitration is nonbinding, either party is free to reject the arbitrator’s decision and take the dispute to court.

How Does Arbitration Work?

The process of arbitration will vary depending on the circumstances of the case and the jurisdiction of the dispute. Generally, the first step to any arbitration is initiating the arbitration. The next step is appointing or selecting an arbitrator. If your agreement requires you to use one of the large arbitration associations, the association helps select the arbitrator who will hear and decide the dispute. If no arbitration association has been specified, the parties are on their own to administer the proceeding, choose arbitrators, and set the schedule and rules that will control. Usually preliminary conferences, meetings, and briefs are help with, and submitted between, the parties and the arbitrator. Meetings are sometimes held before the arbitration hearing to lay out details such as the need for confidentiality throughout the entire process and the timetable for the process. The claimant, who has initiated the dispute, will set out a summary of the matters in dispute and the remedy sought in writing, and the respondent, who did not initiate the dispute, will have an opportunity to respond.

Arbitration hearings are usually held on neutral ground, and the arbitrator will listen to oral arguments, question witnesses, and get clarification on any testimony or evidence elicited during the arbitration. Following the hearing and any additional submissions from the parties or their attorneys, arbitrators will then render a decision and/or an award. Arbitrators are free to base their decisions on their own ideas of what is fair and just. Arbitration decisions are usually regarded as final and can generally only be appealed if there is proof that corruption, fraud, or undue influence was used in securing the award; the arbitrator was corrupt or biased; the arbitrator refused to postpone the hearing even though there was sufficient cause to delay it; and/or the arbitrator exceeded his or her power.

If you involved in an arbitration, you will likely want to hire a lawyer to help you with the arbitration. To find a lawyer in your type of matter, quickly posting a short summary of your legal needs on Legal Services Link and let the perfect lawyer come to you!

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Posted - 01/02/2017