What is arbitration?
Binding arbitration (which lawyers refer to simply as “arbitration”) is a process in which one or more arbitrators make a final and binding decision as to disputed matters on behalf of the parties to the conflict. The arbitrator(s) hold a “hearing” (which is like a trial without a jury) and issue a decision which is usually in writing. Binding arbitration is different from a courtroom trial in the following ways:
- Informality. The parties to binding arbitration can agree or the presiding arbitrator can decide on the time and location of the hearing, the procedures used and the evidence allowed. Normally the entire process is substantially less formal than courtroom procedures.
- Speed. Most civil courthouse trial cases take years to conclude. But binding arbitration can be completed just a few months after the decision to arbitrate is made.
- Privacy. Like mediation, binding arbitration takes place away from the courthouse and includes only the participants to the disagreement itself. The decision of the arbitrator(s), however, can be filed in court and an official court judgment can be entered confirming the result.
- Finality. The “award” (decision) of the arbitrator(s) is a full and final end to the matters addressed. No judge can review or overrule its terms if the arbitration procedure used is consistent with the basic principles of arbitration, as set forth by law. [Click on our “Resources” tab for links to relevant statutes.] When you get the arbitration decision, the dispute is ended. If a lawsuit had already been started, the lawyer that represents the party with the favorable arbitration decision will file the decision in court and ask for an official court judgment confirming the arbitration award. Once the judgment is entered, the case is over. You are relieved of the stress and uncertainty of the matter once and for all. If no lawsuit had been started before the arbitration takes place, the party with the favorable arbitration decision can start a court case simply to get an enforceable judgment in accordance with the arbitration award.
Who decides that a case will be subject to binding arbitration?
The decision to proceed with binding arbitration is normally made in one of three ways.
- Earlier contract to arbitrate. Many consumer and business contracts include a statement that the parties give up their right to a courtroom trial and, instead, agree that any dispute be resolved by binding arbitration. If either party to a disagreement over something covered by the contract makes the demand, then binding arbitration will be instituted.
- Agreement by the parties. Parties to a dispute not covered by such a contract can simply agree after the conflict arises that binding arbitration is the best method of resolution.
- Outcome of mediation. Often those involved in a conflict all know that a courthouse trial would be out of the question due to expense, time, publicity or any other reason. They can agree to seek the assistance of a mediator with the understanding that if any issues are not resolved by mediation the mediator will have the authority to act as arbitrator and make the determination to conclude the matter.