Arbitration is a form of alternative dispute resolution – a way to resolve disputes outside of the courts. It is a private determination of a dispute by an independent third party, and is generally equally as binding as litigation, unlike mediation and negotiation.
The parties in question hand empower an arbitrator to determine the dispute between them. As, unlike a court, arbitrators do not have jurisdiction themselves this is done by agreement. It is a consensual process. Often, agreements to arbitrate are found in the written contract agreed by the parties. This agreement to arbitrate will often set out the basic parameters of the process, such as the rules to be applied, the number of arbitrators and the language of the proceedings. However, after a dispute has arisen it is possible for the parties to agree to arbitrate a dispute even where this was not part of an earlier agreement, although this is less common.
Sometimes the process will be presided over by one arbitrator; sometimes by a panel of arbitrators. The process of arbitration is usually broadly similar to that of a court case: evidence is presented, arguments are made and witnesses are called. However, many of these features are simplified or limited so as to make the process quicker than the average courtroom trial. The parties can use their agreement to arbitrate to tailor the process – for example by setting time limits for the process in advance, or limiting disclosure.
After the parties have made their submissions, the arbitrator (or panel of arbitrators) will deliver a ruling to the parties. In most cases, there is no appeal possible.
Choice of decision maker
One of the key characteristics of arbitration is that the parties may choose a person with expertise in the subject matter, meaning the evidence and real-term effects of the judgement will be more readily understood.
Arbitration is usually confidential – the hearings are private meetings which the public (and journalists) may not attend, which can be very comforting to parties in sensitive matters. In addition, unlike court judgments, the determinations of the arbitrator(s), known as awards, are usually not publicly available documents. Consequentially, arbitration allows resolve disputes behind closed doors should they choose to do so.
Arbitration hearings are arranged at times and places to suit the parties and arbitrators. They are also flexible, and so procedures can be tailored to suit the requirements of the parties or circumstances. For example, witness or document numbers can be limited. A time limit for the whole proceeding can be imposed. The parties could agree to dispense with hearings and request the arbitrator(s) make the award on the basis of a review of the relevant documents.
A key advantage of arbitration is that the awards can be easily enforced in almost all countries around the world under the New York Convention. Court judgments are not always as easily exportable.
Arbitration vs Litigation?
There are positive and negative aspects to both arbitration and litigation, thus the suitability of either will depend on both the circumstances and the parties involved. Generally, arbitration is viewed as a more tailored, private path to dispute resolution. It can also be a faster process, and parties are not always required to attend a hearing as arbitration can be conducted on a documents-only basis. However, the formality, public nature of litigation and routes for appeal provided by the court system could be advantageous to some. There is no one size fits all solution to dispute resolution and you should always select the method most suited to your particular circumstances.