Legal Jargon Explained:
Defining "Arbitration”
In this month’s edition of Legal Jargon Explained, we are looking at “arbitration,” a widely employed method for settling legal disputes known for its efficiency, flexibility, and confidentiality, making it an attractive alternative to courtroom litigation.
In short, arbitration involves the parties agreeing to resolve their issues without resorting to a courtroom. Instead of heading to court, the conflicting parties present their case to one or more impartial arbitrators. These arbitrators are chosen based on their expertise in the specific field relevant to the dispute, and they function as neutral third parties. The arbitration process commences with an agreement to arbitrate.
THE PROCESS
The arbitration process commences with an agreement to arbitrate. Once the decision to arbitrate is made, the parties involved proceed to select one or more arbitrators who act as judges during the arbitration proceedings. The arbitration hearing, which resembles a trial but in a less formal setting, provides the platform for both parties to present evidence, witnesses, and arguments supporting their respective positions. After the hearing, the arbitrator(s) issue an arbitration award, which serves as a legally binding decision that resolves the dispute, potentially including remedies, damages, and any other necessary instructions. This award can be enforced in a court of law, rendering it legally binding.
THE DIFFERENCES
Arbitration differs from litigation in several ways. It is generally less formal, with fewer procedural rules and formalities, making it more accessible. Arbitration proceedings are often quicker, and the process maintains a higher degree of privacy than courtroom proceedings, which are typically open to the public. Lastly, arbitration awards are generally considered final and not subject to appeal on the same grounds as court judgments.
THE PROS & CONS
Arbitration offers several advantages, including efficiency due to streamlined procedures, flexibility, and the ability of the parties involved to retain control over critical aspects of the process. Moreover, arbitration is confidential by nature, keeping the details of the dispute, evidence, and the award private. Parties can also select arbitrators with specialized knowledge in the relevant field, ensuring that decision-makers possess expertise. Finally, arbitration awards are typically not subject to appeal, providing a more final resolution to the dispute.
However like any system, there are also potential downsides. Notably, as we previously stated, once an arbitration decision has been reached, it is final. In court, decisions can be appealed. Not so in arbitrations. While it does provide final resolution, there may be other factors that prove to make that resolution unfair. Because arbitration hearings are private affairs, there is a possibility for judgments to be biased. The arbitrator themselves may have a relationship with one of the involved parties and may make rulings based on the existing relationship. Further, as arbitrations are not court room trials, they do not always follow the formal rules of procedure and evidence that could be expected. For example, the arbitrator may admit an item as evidence that normally would not be in a court room.
Arbitration stands as a valuable means of resolving disputes, offering efficiency, privacy, and a tailored approach to the needs of the parties involved. Understanding the arbitration process, its advantages, and how it contrasts with traditional litigation is vital for informed decision-making when considering alternative dispute resolution methods.