Arbitration

Arbitration, a form of alternative dispute resolution (ADR), is a way to resolve disputes outside the courts. The dispute will be decided by one or more persons (the 'arbitrators', 'arbiters' or 'arbitral tribunal'), which renders the 'arbitration award'. An arbitration award is legally binding on both sides and enforceable in the courts. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. In certain countries such as the United States, arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts and may include a waiver of the right to bring a class action claim. Mandatory consumer and employment arbitration should be distinguished from consensual arbitration, particularly commercial arbitration. Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that one party imposes on the other, in which the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is similar to mediation in that a decision cannot be imposed on the parties. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbiter remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable. By one definition arbitration is binding and non-binding arbitration is therefore technically not arbitration. Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards. Arbitration is not the same as: judicial proceedings (although in some jurisdictions, court proceedings are sometimes referred as arbitrations), alternative dispute resolution (ADR), expert determination, mediation (a form of settlement negotiation facilitated by a neutral third party). Parties often seek to resolve disputes through arbitration because of a number of perceived potential advantages over judicial proceedings. Companies often require arbitration with their customers, but prefer the advantages of courts in disputes with competitors: