What is Arbitration?

As with mediation or any other ADR processes, arbitration is a process involving the use of a neutral or impartial third person who will decide the dispute for the parties. The difference between arbitration and mediation relates to the decision-making authority. In mediation, the parties retain the decision-making authority for themselves. In arbitration, the parties turn that decision-making authority over to the arbitrator. This distinction is important because many people, including some attorneys, are not clear in the difference between the two and use the terms interchangeably.

The Arbitration Process

In arbitration, the parties agree to submit their dispute to a neutral person, the arbitrator, (or panel of arbitrators, usually three) whom they have selected to make a decision. The parties are generally represented by counsel, especially if legal issues are involved, who present and argue their cases before the arbitrator or panel. The arbitrator(s) then decides the case and render(s) a decision or “award”. The parties are not required to have attorneys present, however, and in some simpler cases not involving legal issues, parties frequently go to arbitration without counsel.

Generally, by the agreement of the parties in advance, or depending upon what arbitration law they proceed under, the award is final and binding and cannot be appealed unless fraud, misconduct or some irregularity in the process was involved. In binding arbitration, the award can be enforced in the same manner as a court rendered judgment.

Advantages Over Litigation

While arbitration is like a court proceeding, it can have advantages over a lawsuit in court. The parties, in their agreement to arbitrate, may choose, or influence the choice of the arbitrators(s) who will hear and decide the case. They also can control the ground rules of the proceedings, which can include such things as scheduling; the scope of the awards; what records or documents, if any, may be introduced; and what witnesses, if any, may be called to testify. Rules of evidence are generally relaxed and the proceeding is usually far less formal.

There is generally less, or minimal, pre-hearing discovery and the case generally proceeds at a much swifter pace than in litigation. As a result, arbitration is generally far less costly and time consuming than litigation. It allows the parties to get the dispute over and done with and get on with their lives or other business at hand.

Another major advantage to arbitration over litigation is that it is private. Personal information as well as sensitive business details as marketing plans and trade secrets can be kept out of the public domain, information that would otherwise become public in traditional litigation.

Two Frequently Asked Questions

There is a clause in an agreement requiring all disputes to be submitted to arbitration. What if a dispute arises but the other party refuses to arbitrate?

The party desiring to arbitrate can file a motion to compel arbitration with the court. Assuming that the court finds the arbitration clause valid, the court will order the parties to proceed to arbitration in accordance with the terms of the agreement.

An arbitration clause in a preexisting agreement provides that all disputes must be arbitrated through a dispute resolution organization such as the American Arbitration Association. Must the parties use that organization, or may they use another arbitrator instead if they wish?

Provided that both, or all, parties to the agreement are in accord, they may amend their original agreement to provide that the arbitration may take place before another arbitrator.

2080 Linglestown Road – Suite 102 Harrisburg, PA 17110; Phone: 717-526-4422; Fax: 717-766-3372; Email Joseph Skelly