Volume 6 Issue 2
© by Newland & Associates
What is arbitration? Perhaps the
best way to define "Arbitration" is to distinguish Arbitration from
other means of resolving conflicts. Broadly
speaking, there are at least four ways to settle disputes:
Since Fighting is both a well known means and impractical, we’ll ignore it.
Of the remaining three, litigation is the most formal way of handling a
disagreement and mediation is the least formal, leaving Arbitration sandwiched
in the middle.
Litigation is the default system. It
is a process usually supervised by older people in odd black robes wearing
perpetual frowns. If you have a
dispute with your neighbor, Evyl, civil litigation allows you, the plaintiff, to
bring an action in court to get monetary damages from Evyl for, or restrain him
from, raising the pythons which recently ate both of your dogs.
Mediation, often used in labor disputes and divorce cases, is a voluntary
process of bringing aggrieved parties together with the hope of reaching a
resolution. If mediation is agreed
to, mediators, often paid, discuss the problem with the two parties and try to
effectuate a settlement to which both parties MUST agree.
The need for mutual agreement is deemed by some to be the major weakness
in the mediation process. If one of
the parties is a flaming #$%&*, it will be difficult to reach agreement.
How Does Arbitration Work? What
Are Some Of Its Advantages And Disadvantages?
Arbitration is most often used to settle contractual or commercial disputes.
Rather than going to court or mediation, the parties can agree in advance (in
the contract) that Arbitration will be used to settle any disagreements.
Many lawyers can, and will, differ strongly on Arbitration’s merits, so
don’t be surprised if your attorney disagrees with these comments.
If the underlying agreement provides for Arbitration, one of the parties to
the contract must file a request for Arbitration and pay the required fee to a
group that provides Arbitration services. Often
the Arbitration service will suggest an arbitrator or arbitrators to which the
parties must agree. The arbitrator may be an attorney, judge, CPA, or
After the parties have defined their dispute, there will be a hearing, often
in the arbitrator’s office, at which the parties present evidence and
witnesses in a fairly informal manner without the formal rules of evidence used
in court litigation. After the
evidence has been presented, the arbitrator reaches a decision and usually later
sends the parties a written opinion (an order).
Arbitration is usually quicker, simpler, and cheaper than litigation, but to
many there is one perceived disadvantage — no appeal.
With a few narrow exceptions, like fraud, there is no way to appeal an
Like litigated judgments, and unlike mediated settlements, an Arbitration
order can be enforced in court under laws that allow an Arbitration decision to
be entered in the court system and then become a “judgment.”
The prevailing party can collect on the Arbitration order using all
available legal collection methods, such as levies on property.
The ability to collect an Arbitration monetary judgment through the legal
system is one the main distinguishing factors between Arbitration and mediation.
There are some other advantages of Arbitration, as well:
The arbitrator will often be more familiar with
business matters than most judges.
The Arbitration proceedings are not public and there
are no juries.
Newland & Associates regularly incorporates Arbitration wording in its
fee agreements. If you would like
to see our version of Arbitration agreement wording, CLICK
HERE or give us a call.
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