What is Arbitration?

As the costs of litigation have increased dramatically over the last ten years and the traditional legal system has become overloaded, leading to long delays in bringing matters to conclusion, individuals and businesses have looked for other, quicker and less expensive ways to solve their disputes. Alternative Dispute Resolution, often called ADR, really means a number of ways by which disputes are dealt with outside the court process. The most common forms of ADR are negotiation, mediation and arbitration.

So what is Arbitration?

Arbitration is a private dispute resolution process where disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments. Arbitration is different than mediation because the neutral arbitrator has the authority to make a decision about the dispute. The arbitration process is similar to a trial in that the parties make opening statements and present evidence to the arbitrator. Compared to traditional trials, arbitration can usually be completed more quickly and is less formal. For example, often the parties do not have to follow the strict rules of evidence.

After the hearing, the arbitrator issues an award. Some awards simply announce the decision (a declaration award) in all awards a reasoned decision is provided to the parties. The arbitration process may be either binding or non-binding. Where arbitration is binding, the decision is final, can be enforced by a court, and can only be appealed on very narrow grounds. Where arbitration is non-binding, the arbitrator’s award is advisory and can be final only if accepted by the parties.

Arbitration should be considered if:

    The court setting lacks specific expert knowledge of the subject area.
    It is an inter-jurisdictional dispute.
    You require rules of procedure.
    Expert, knowledgeable arbitrators can be selected.
    You require finality or a full substitute for litigation.

You should not consider Arbitration if:

    Rights of non-parties are affected by outcome.
    Dispute cannot be kept confidential if there is an appeal.