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What is Arbitration?

Arbitration is one of various methods that together are referred to as alternative dispute resolution or ADR. As suggested by the name, the idea behind methods of ADR is to provide an alternative to filing a lawsuit and going to court, which is the traditional method for resolving legal disputes. Arbitration and similar alternatives were primarily designed to provide for a streamlined and cost-conscious option to deal with a legal issue. Below we'll take a look at when arbitration is an option, how it works, and how it differs from going to court.

When can I Arbitrate?

Anyone can agree to arbitrate a disagreement or legal issue, but the key word is "agree". Simply because one of the parties in a dispute desires to enter into arbitration does not take away another party's right to go to court. Arbitration only comes about when two parties agree to it, either before or after a legal dispute comes up. For this reason, agreements to arbitrate disputes are typically found somewhere in a written contract agreed to by both parties.

Still, this doesn't mean that agreements to arbitrate are rare. Far from it. Although many people may not be aware or conscious of it, consumers every day agree to resolve potential legal problems via arbitration (or some other method of alternative dispute resolution) in the course of their shopping, traveling, and numerous every-day transactions. For example, online shoppers may or may not be surprised to discover that if they read the fine print disclaimers or notices on their favorite travel website, it may contain agreements to resolve any disputes via arbitration or a similar form of ADR.

How Arbitration Works

Although arbitration is used broadly to describe a method of alternative dispute resolution, arbitrations themselves can take many forms. In almost any arbitration, however, the complaining party will send the opposing party a notice of their intent to arbitrate a dispute, outlining the basis for the dispute. There is typically a period for response, followed by the selection of arbitrators, and then the hearing itself.

Arbitrations are sometimes presided over by a panel of arbitrators, as opposed to just one arbitrator. Regardless, the selection process is typically outlined either in the contract, but typically some type of input from both parties is requested.

The rules of arbitration themselves can also vary widely. In many circumstances, a contract will specify the rules and timelines that will be applied in a dispute. These are typically more streamlined but parties should refer to their contract or the rules specified therein for the exact rules that govern their dispute. An attorney specializing in alternative dispute resolution can also provide valuable assistance in such matters.

In general, the arbitration process involves many of the same components as a courtroom trial. For example, evidence is presented, arguments are made, witnesses are called and questioned by the parties, and so forth. However, many of these facets are simplified or limited so as to make the process quicker than the typical courtroom trial.

Following the required hearings, an arbitrator or a panel of arbitrators will usually deliver a ruling to the parties within a specific period of time. Depending on the type of arbitration, this ruling may be final, or there may be options to appeal.

Arbitration vs. Litigation

Comparisons between arbitration and traditional litigation (or a lawsuit) are frequent. To some extent, these comparisons will depend on the perspective of the individual or company involved. However, in general, arbitration is often viewed as a more streamlined and less expensive method of resolving a dispute between two parties.

For consumers, however, this is not always the case. For example, when a legal issue is relatively minor and doesn't involve a large amount of money, small claims courts can offer a relatively quick and inexpensive method for resolving a dispute even when compared to arbitration. Having to pay for an arbitrator's time and the associated expenses, might discourage consumers from making relatively minor claims, although sometimes the costs are shared or even covered.

The difference between arbitrators and judges is important to consider, as well. When someone files a case in court, neither they nor the defending party get any input into who the judge will be. Judges are typically assigned randomly to a case. However, with an arbitration, the parties often have some input into who will end up being their arbitrator. For example, both the complaining and responding party may be allowed to select from a pool of arbitrators, or eliminate choices from provided options, etc. Arbitrators can also be required to be experts in the field or industry involved in a dispute, whereas a judge may or may not have such expertise. On the flip side, some would suggest that this randomness and lack of selection is a plus for litigation, as judges have no reason to worry about whether they will ever be "picked" to decide another case for the parties before them.

Another potential benefit that arbitration has with respect to going to court is that the proceedings are typically not part of the public record and may have more streamlined procedures and rules. For individuals who seek to resolve their dispute quickly and keep the details private, these considerations may prove valuable. These are just some of the differences between arbitration and going to court, but with the growing use of arbitration in employment, business, and other venues, it is important to be informed about arbitration and related methods of ADR.

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