Arbitration is an alternate method of resolving a dispute, or a legal case. Instead of going to court, which could take years and be extremely expensive, the parties submit their dispute to an arbitrator.
Black’s Law Dictionary defines arbitration as:
“The reference of a dispute to an impartial third person chosen by the parties to the dispute who agree in advance to accept the arbitrator’s decision issued after a hearing at which both parties have an opportunity to be heard.”
Many people have participated in arbitration without realizing it. Both parties to a dispute have a common friend that they trust, and they agree to submit their dispute to this friend, and accept his decision. This is an informal arbitration.
The advantage of arbitration is that it provides a faster and more economical way of resolving disputes. There are no appeals in arbitration. The arbitrator’s decision is final and the parties have to accept it.
What cases or disputes go to arbitration? This is usually determined at the beginning of the relationship between the parties. The parties enter into a written contract, and the contract contains an arbitration clause requiring compulsory arbitration. For example, nowadays most cruise companies have arbitration clauses in their employment contracts which require injured crew members to file their claims for compensation in arbitration. Also many consumer contracts call for arbitration such as the contracts offered by the cell phone companies, the credit card companies, etc.
How are the arbitrators chosen? The arbitrators are chosen by agreement of the parties. If there is no agreement, the arbitrators are chosen by the organization in charge of administering the arbitration. The arbitrators are usually highly experienced retired judges, or lawyers.
Who is in charge of the logistics of arbitration? Nowadays, there are many organizations that provide the logistical support necessary for a successful arbitration. These organizations appoint the arbitrators, organize the preliminary hearings, provide schedules for obtaining and submitting evidence, provide a conference room for the final hearing, inform the parties of the arbitrator’s final award, etc. For example, the American Arbitration Association is one of the best known organizations providing logistical support to the parties in an arbitration.
Arbitration privatizes the functions of the courts, but does not provide the same due process and constitutional guarantees that the courts provide. Workers and consumers should beware of contracts calling for arbitration.