Arbitration for Dispute Resolution

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Many citizens are subject to arbitration without even knowing. Ever look at the small print booklets that are the terms of your credit card agreements? Those agreements often contain arbitration clauses that require any disputes to be tried in an arbitration setting. Also, most contracts between businesses or between a business and government agency are controlled by arbitration clauses. It is important to be aware of such clauses to understand what forum you are required to go through to get your dispute heard.

What is Arbitration?

Arbitration is a form of alternative dispute resolution, aiming to settle matters outside of the courtroom. The arbitration process is designed to be faster and more responsive to the parties’ complaints. Although the process is billed as cheaper than full litigation, arbitration expenses can be large depending on the arbitrator(s) used.

The arbitration setting is similar to a trial before a judge, but less formal and subject to different rules. While arbitration is similar to mediation, they are not the same thing and their differences must be noted.

How Arbitration Works

Arbitration is a similar forum to the courtroom, but with many distinct differences. For example, often arbitration judges are not assigned randomly, unless agreed to, but rather selected by their experience or expertise in the practice area of the dispute. As well, arbitration judges often commend higher rates based on such experience and prestige.

In an arbitration hearing, rules of evidence and procedure are much more relaxed than the courtroom. While there are rules in terms of what can be presented and how it is presented, parties usually do not have to go through the strenuous foundational and presenting hurdles that federal and state evidence rules require. The procedural process of an arbitration hearing is much more informal in that presentation of cases often goes back and forth, rather than having only one side present at one time only.

The arbitration judge, or arbitrator, has full power to decide how evidence is presented, how pleadings are made, when hearings are held, if/when evidence is disclosed, and if expert witnesses are needed. In most arbitration agreements, the substantive law will be spelled out. For example, the agreement may state that California law applies, meaning that the substantive action (say, a contract dispute) will be governed by the contract laws of California.

The arbitrator’s most important job is making the decision, which is typically binding and final on the parties. In mediation, judgments are typically not binding, and allow for the losing party to reject the mediated agreement and file in court.

Advantages and Disadvantages of Arbitration

The advantages to arbitration are:

  • Less expensive than fully litigated cases
  • Not as time consuming as a court case
  • More responsive to a dispute based on an arbitrator’s expertise
  • Typically confidential and out of the public eye.

The disadvantages include:

  • More difficult avenues to appeal, if even able to do so
  • Ability for parties to avoid paying judgments
  • Rigid in their application of law if agreed to (difficult to change rules contained in arbitration agreements)
  • Near-absolute discretion of the judge to limit discovery and evidence presentation.

Why you Need a Lawyer During Arbitration

Although arbitration is less formal, a lawyer is usually recommended to help navigate the arbitration process. Just like a courtroom, having a lawyer during arbitration can ensure your rights are protected, and that you receive all the strategic and practical advantages afforded by a lawyer experienced in arbitration proceedings.