Arbitration is an adversarial process whereby a neutral third party is empowered to decide the outcome of a dispute. It is often a preferred means of resolving conflicts in order to avoid the expense, delay, and acrimony of more formal litigation and trial. Disputes in arbitration can be resolved by a single arbitrator or a panel of three arbitrators (tribunal). When parties submit their dispute to arbitration, they agree to be bound by and comply with the arbitrator’s decision, also called an award. The award is given after each side presents evidence and witnesses, and has the same force and effect as a contract in writing between the parties. The award can later be confirmed or vacated by the court based upon a petition by the prevailing or non-prevailing party. Once confirmed, the award is entered as a judgment.
What are the Advantages of Arbitration?
- The parties are encouraged to work together peaceably and often participate in structuring the resolution, which avoids the escalation of anger and hostility often associated with litigation.
- Since arbitration is a less formal and more flexible process, it is typically faster and more cost-efficient than the more cumbersome court process.
- Unlike trials, arbitration proceedings can be scheduled around the needs and availabilities of the parties (depending on the availability of the arbitrator).
- There are more simplified rules of evidence and procedure. The convoluted rules of evidence do not apply and the right to discovery – often criticized as a delaying and game-playing tactic – is either limited by the parties’ agreement or is at the arbitrator’s discretion (with limited exception for personal injury cases).
- There are limited grounds for judicial review in order to effectuate the parties’ agreement that the award be
- The parties select their arbitrator or panel of arbitrators directly, enabling them to pick someone with the requisite amount of experience and subject matter expertise to render an accurate and appropriate award.
- The arbitration process is private and confidential.
How are Disputes Submitted to Arbitration?
Parties can become involved in the arbitration process in one of three ways: judicial arbitration, contractual arbitration or by stipulation.
Judicial arbitration is a statutory procedure (Code of Civil Procedure §§1141.10, et seq.) by which certain types of cases are directed to nonbinding arbitration before trial. This process was designed to expedite and streamline resolution of actions through an arbitrator’s neutral evaluation, accomplished through a simplified and economical procedure for obtaining prompt and equitable resolution of disputes. Court-ordered arbitrations are non-binding, meaning that either party who is dissatisfied with the arbitrator’s award may request a new trial. Since the process is non-binding, no party has given up any constitutional rights by engaging in this type of arbitration.
Contractual arbitration is a legal process by which a dispute arising from or related to a contract is resolved. It is based on a pre-dispute agreement between the parties. In contractual arbitration, the parties have agreed pursuant to an arbitration provision in their contract that in the event of a dispute, the matter will be resolved by arbitration. In most cases, arbitration related to a contract is legally binding. Arbitration can be structured in a number of ways. Most commonly, an arbitrator or a panel of arbitrators will listen to evidence and arguments from both sides regarding the dispute. The arbitrator will then come to a decision and issue an award that is final except for certain extraordinary circumstances. In contractual arbitration, a set of rules or procedures has been incorporated into the arbitration clause that dictates how the parties will proceed.
Arbitration by stipulation is based on a post-dispute agreement between the parties whereby they have agreed to arbitrate their dispute after it has arisen. The parties must then choose which set of rules and procedures to follow to guide the proceedings. Arbitration by stipulation is typically binding and the arbitrator’s award is final except for certain extraordinary circumstances.
What is Consumer Arbitration?
Consumer arbitration involves disputes between consumers (customers, clients or patrons) and businesses. Most consumer arbitrations occur pursuant to a pre-dispute arbitration clause agreed upon by the consumer in order to obtain the service or product from the business. The mandatory arbitration provision will typically be located in:
- a contract with a consumer party, who is defined as
- an individual seeking or acquiring goods or services for personal/family/household purposes, including by lease; or
- an enrollee/subscriber/insured in a healthcare insurance plan; or
- a person with a medical malpractice claim; or
- an employee or applicant for prospective employment
- The contract was drafted by or on behalf of the nonconsumer party; and
- The consumer party was required to accept the arbitration provision in the contract.
What is the Arbitration Process?
To begin the arbitration process, a claimant submits a demand for arbitration, stipulation to arbitrate or court order to ADR Services, Inc., and the opposing party (respondent) may file a response to the claim. The neutral arbitrator collects evidence and hears arguments from both parties, and then issues an award. Pre-hearing conferences determine procedural matters for the arbitration hearing (such as whether the arbitration is to be confidential). At the arbitration hearing, the parties present opening statements, evidence such as documents and tangible objects, and witnesses who testify and are cross-examined. Closing arguments may also be presented at the hearing, or submitted afterwards in the form of a post-hearing brief. The arbitrator will then issue an award. The arbitrator’s award consists of a written decision, which may simply consist of a statement of the relief awarded to each party, or it may include a written explanation of the arbitrator’s findings. Appeal or review of an arbitrator’s decision is limited and must be based on extraordinary circumstances.
For a more detailed description of the arbitration process, please refer to the ADR Services, Inc. Arbitration Rules.