Arbitration is a form of alternative dispute resolution (ADR) commonly used to solve problems outside of court. It is like mediation in that it is an alternative to litigation, but unlike mediation, in that arbitration is binding, and the arbitrator has authority. In contrast, the role of a mediator is facilitative.
Arbitration can be helpful for businesses, and businesses often include arbitration clauses in their contracts because of their benefits, including their speed, flexibility (arbitration can be customized to meet the parties’ needs) and because it can save the parties money.
Where is arbitration used?
Businesses can use arbitration in various commercial, employment and consumer disputes. Because it is informal, arbitration is flexible and can cover many problems.
How does arbitration happen?
Arbitration takes place privately. The parties come together with the arbitrator.
The nature of arbitration allows the parties to choose the terms of the arbitration process. These terms include the rules and procedures that will govern the process, the time and location of the proceedings and the type of evidence that will be allowed.
After that, however, the arbitrator takes over, listens to both sides, looks at the evidence, and renders an award, meaning they decide for one party. An arbitrator’s decision is not appealable in court, which is one potential downside of arbitration, but businesses often choose to use arbitration anyway because its benefits often outweigh its disadvantages.
The parties cannot appeal an arbitrator’s court decision with few exceptions. For example, if the arbitrator’s award goes against public policy or is illegal. Generally speaking. However, judges respect arbitrators’ decisions and try not to get involved unless necessary.
Arbitration is an efficient and effective way to solve problems outside of the courtroom, and it saves money, time and the emotional strain of a lawsuit.