Robert Wildau NewSouth Mediation Services

Arbitration

Arbitration is a process usually agreed to in advance by contract wherein people submit their dispute to an impartial third party who they select to render a decision after hearing their evidence and arguments. But parties in conflict can decide at any time to pick such a neutral decisionmaker instead of taking their chance with an elected judge. Although it is a form of private adjudication, arbitration is generally enforceable under state, federal and international law.

History

Modern arbitration traces its roots back to the Middle Ages when guilds and merchant organizations set up their own tribunals to hear cases in preference to the king's courts which were seen as slow, corrupt, expensive and ignorant of local norms and customs. Arbitration was the primary form of dispute resolution for many North American colonies, but it declined through the 1800s because of hostility from the common law (state and federal) courts. In the 20th century arbitration enjoyed a steady resurgence, especially in commercial, international trade, and labor-management disputes. Today, the courts favor arbitration because it keeps many complex and time-consuming cases off their dockets.

Advantages

Arbitration's flexibility gives it many advantages over litigation:

Cost: A well-drafted arbitration clause and good arbitrators can greatly reduce the costs of arbitration by comparison with litigation.
Speed: The parties can agree on procedures which expedite resolution, and can schedule hearings without waiting on crowded court dockets.
Informality: The formal rules of evidence used in court don't apply in arbitration, so hearings can be managed for efficient presentation, using documents only, on the telephone or at the site of the dispute itself.
Limited discovery: Except to the extent the parties agree to it, the discovery that makes litigation so slow and expensive doesn't exist in arbitration.
Expertise of the decision-maker: The parties can choose arbitrators who are experts in the subject of the dispute, which saves time in trying technical matters on which they would have to educate a judge and jury.
Finality: Arbitration awards can only be challenged on very limited grounds, so appeals are rare. The winner in arbitration is likely to have cash in hand before a court case would even come to trial.

Disadvantages

The very features which make arbitration desirable also have their down sides:

No discovery: In cases where the evidence one party needs is controlled by the other, the lack of discovery may be crippling. Also, lawyers today tend to be uncomfortable with "trial by ambush."
Limited right of appeal: Though the arbitrator is not strictly bound to follow the law, the finality of an arbitration award precludes either party getting a new trial even if the result is unfair.
Uncontrolled adversarial behavior: Arbitration practice today is becoming steadily more adversarial -- more like litigation. Arbitrators avoid appearing to choke off any party's right to a fair hearing, so they may not feel as free as judges to enforce their procedural decisions. Difficult parties or lawyers are tempted to delay or abuse the process, thereby increasing costs for all.

The Role of the Arbitrator

Unlike a mediator who helps the parties negotiate their own settlement, an arbitrator is chosen by the parties to decide the matter for them. They set the limits of the arbitrator's authority and choose the rules that govern the process, usually by adopting an established body of rules, such as those of the American Arbitration Association. But where a judge normally presides passively over a formal trial, applying the law to the facts as presented by the lawyers, an arbitrator is actively involved in seeking out the facts, and usually has the freedom to apply non-legal criteria to the case.

How Do Parties Get to Arbitration?

Many cases end up in arbitration because the parties signed a contract with a form paragraph they barely read, specifying that disputes arising from the contract would be resolved by that process. They typically contact the organization described in the contract and sign on to have their dispute administered by that organization. But they can just as easily agree to engage another firm or an experienced individual arbitrator to administer and hear their case under the same rules. Disputants who simply want a third party to make a decision for them under well-defined state or federal arbitration law can submit their case for arbitration to NewSouth Mediation Services, on forms we provide, at reasonable hourly rates.

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