Part 1 of this series discussed mediation. This second part discusses arbitration, another dispute resolution method that provides an alternative to the traditional path of going to court to resolve a dispute.
The chief difference between mediation and arbitration is that in mediation the parties work to reach a resolution of their differences on which they can all agree, while in arbitration the resolution is imposed on the parties by someone else.
Many written agreements now specify that any dispute must be resolved by arbitration. This means that the parties can’t file a lawsuit in a court, but must instead hire a dispute resolution company to resolve their argument. Parties to a lawsuit pay a filing fee but don’t have to directly pay the salary of the judge and courthouse staff who handle their case. In contrast, in an arbitration the parties must pay not only a filing fee to cover administrative expenses of the arbitration, but also an hourly fee for the services of the arbitrator(s).
Arbitration generally involves limited use of “discovery”, meaning that the parties may exchange a limited range of documents and information, and possibly take a few depositions. The idea is to engage in less fact-finding, or discovery, than would be customary in a case pending in a court. This process generally takes place over a much shorter period of time than would be typical in a lawsuit, with arbitrations typically concluding in a matter of months while lawsuits can linger for several years.
Once fact-finding is complete, a shortened trial, with just a few key witnesses, will be held before either one or three arbitrators. (There can’t be an even number of arbitrators because of the risk that the arbitrators won’t reach agreement.)
Sometimes the parties are given a chance to file briefs further explaining their cases after the hearing. The rules for most arbitration services require the arbitrator(s) to issue a written award within 30-60 days of the conclusion of the hearing.
Arbitration is usually binding. Occasionally a party will agree only to non-binding arbitration. In such a situation, the arbitrator’s decision will not resolve the case but it will nevertheless give the parties insight into how a neutral third party evaluates the dispute. This information often ultimately results in a settlement.
Although final decisions by judges can generally be reviewed and corrected (where necessary) by a higher level “appellate” court, a similar appeal will not be available from a binding arbitration award except in very narrow circumstances. The parties give up the chance to appeal an arbitration award in favor of achieving closure quickly.
Please note that this article is not intended to be comprehensive, but merely briefly summarizes the arbitration process. Counsel can advise regarding the arbitration of specific disputes that may involve you or your business.
The analysis set forth in this article is provided for general understanding only and should not be considered legal advice. Counsel should always be consulted for advice regarding a specific situation.