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The arbitration process is a kind of dispute resolution procedure where an arbitrator listens to a dispute in a private setting and makes a final decision for the parties involved. The arbitrator will typically specialize in the specific dispute area, such as topics related to commercial businesses, topics related to employment matters, or even sports-related issues. The arbitration process does not occur in a courtroom and there is not an emphasis on the technicalities of the law like there would be in a courtroom proceeding. In addition, arbitration is usually binding, but if the parties decide beforehand to have a non-binding arbitration then that is allowed.
If the parties decide to follow traditional guidelines, the arbitration process will almost feel like a courtroom trial. There will typically be an opening statement from each party first. Then, the party that is making the claim will present her case to the arbitrator. Through the arbitration process each party will tell the arbitrator what she believes the results of the arbitration will be and why she should be victorious. There can be witnesses and evidence and the closing statements will finish up the process.
As part of the arbitration process, the parties involved in the dispute can set guidelines or parameters before the arbitration hearing occurs. By pre-setting the guidelines, the parties have a little control over how the hearing will proceed; however, once the hearing begins, it is the arbitrator who is control over the arbitration process and the final outcome. For people who do not want the outcome determined by a third party, negotiation is a better option. Through negotiations, the parties are entirely in control over the process and the outcome.
One of the benefits to using arbitration over litigation is that the parties can develop an arbitration process that fits their individual needs when they draft the arbitration clause in the contract between the parties. For example, they can agree to participate in a non-binding arbitration or they can decide that evidentiary rules that are followed in court apply or do not apply. In addition, they can set perimeters on how involved the lawyers will be or even decide that there will not be any lawyers involved at all. Also, they can set time limits on the arbitration hearing, itself.
One of the main differences between arbitration and litigation is that the arbitrator has more leniency than a courtroom judge. Specifically, the arbitrator can actively participate in the case by requesting additional evidence or asking about other witnesses. In addition, the arbitrator usually has about a month to decide the outcome of the dispute. The arbitration may give the reasons behind her award or she may just state the outcome without mentioning how she came to that conclusion.
@Vincenzo -- Well, binding arbitration is only sort of binding. What I mean is that people who don't like a decision reached through arbitration can still take the matter up in court. Unlike mediation, though, the person griping about the arbitration decision have to prove it was somehow unfair. Otherwise, that decision might be ratified by a court and the complaining party is stuck with it (unless that decision is appealed, of course).
And that really is how things ought to be. Take a look at an insurance contract or something. There is a good chance there is a clause in there that says you agree to have all disputes under that contract settled through binding arbitration. Now, how many
people read that clause when signing something or are even fully aware of what it means?
If binding arbitration is truly binding, the good Lord only knows what kind of boilerplate language people would throw into contracts and assume things will go their way simply because of an arbitration clause.
People who push for alternative dispute resolution will throw terms like arbitration and mediation around quite a bit. Some people make the mistake of assuming those two are synonymous. I appreciate articles like these because they define what arbitration is quite clearly.
Arbitration is more formal than mediation while mediation is often informal. Also, arbitration can be finding whereas people who don't like the results of a mediation session can typically run off to court and let a judge decide who is right and who is wrong.