What Is Arbitration?

A form of alternative dispute resolution, arbitration is one way of resolving disputes outside of the court system. In this form of conflict resolution, both parties voluntarily submit themselves to an independent third party known as the arbitrator. There can be one arbitrator or a panel of arbitrators who will decide on the case. The conflicting parties agree to follow the decision of the arbitrators. This is unlike mediation where the mediators don’t have the power to decide on the case but simply facilitate discussions between both parties so that they can arrive at a mutual decision.

Arbitration can only take place if both parties agree to it. In the event that both parties sign a contract and wish to have arbitration as a form of dispute resolution later on then a clause to this effect should be included in the contract. For parties wishing to have arbitration as a means of resolving their present conflicts, their mutual consent to the procedure can be evidenced by a submission agreement.

Another characteristic of arbitration is that it is a confidential and private procedure. It is not a court hearing so there will be no court reporter present to take note of the proceedings. The disclosures made during the hearing as well as the award or final decision of the arbitrators are all protected by confidentiality clauses. As such, the records of the hearing are not made available to the public unlike those of hearings done in court.

Moreover, arbitration is also a neutral procedure. Both parties have the freedom to choose the venue or set other parameters for the hearing to ensure that either party does not have an advantage over the other. One way to ensure the neutrality of the proceedings is to allow both parties to choose their arbitrators. Actually, there are three ways by which the arbitrators who will handle the case are chosen. As mentioned above, both parties can mutually agree on their arbitrator or if in the case of a tribunal of arbitrators, each party may appoint their own arbitrator. The second method entails having arbitrators who are appointed by the conflicting parties to appoint their final member or members. The third method entails having the court or another institution previously nominated by both parties.

Arbitration carries with it its own advantages and disadvantages compared to formal court hearings. For starters, it is much faster to resolve a case through arbitration than in a court of law. This is because the arbitration can happen right away once the arbitrators have been chosen and the parameters for the hearing set. This is not the case with hearings in the court system where the court has to schedule the date. Since courts hear many cases in a day, cases can take time to get resolved.

Another advantage of arbitration is that it is less costly compared to formal litigation. This is because the participation of lawyers is limited in arbitration, resulting to lesser legal fees. Moreover, the faster resolution of a case lessens the overall cost of each party. This is unlike a formal court hearing where the lawyers handle the show, so to speak, and bill clients accordingly. The longer the case drags, the higher the attorney’s fees are going to get. Arbitration, however, is not free. There is still a cost involved in this proceeding since arbitrators are still going to be paid for their services by one or both parties, depending on the agreement.

However, a disadvantage with arbitration is that the losing party has no other recourse but to follow the terms of the award stipulated by the arbitrator. In litigation, the losing party has the right to appeal to a higher court until this is already exhausted with the final decision from the Supreme Court. This is not the case in arbitration where the parties have no right to appeal the decision. The award given is binding and both parties should adhere to it unless the party who wants to appeal is certain that the arbitrator was biased in his or her decision. This will have to be proven in court first before the arbitrator’s decision is overturned.

Career Spotlight: Arbitrator

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