What is Arbitration?
In Arbitration, the neutral sits in judgment and issues an opinion. The Arbitrator determines the outcome based upon contracted or accepted norms and standards, evaluating evidence and the factual and legal arguments presented by the parties.
Before entering into binding Arbitration, the parties must agree that the Arbitrator’s determination will be binding and commit to carry out the Arbitrator’s decision. Most Arbitration contract clauses require the parties to submit to binding Arbitration.
Arbitration is private and usually binding. The parties – and, if they are represented, their attorneys – all convene with the Arbitrator in a non-court setting, usually the offices of counsel or a neutral location. There is no judge or jury listening to the process – although the neutral Arbitrator acts as a private judge. Arbitration is never held in a public place like a courtroom. Confidentiality of the Arbitration is directed and protected by governing laws and Agreement of the Parties and is dependent upon the details of the engagement. Often, Arbitration Agreements will contain a clause providing for the decision to be indexed as a judgment in the appropriate court docket. Before coming to Arbitration, the parties determine the details of how the decision is announced and explained.
Often, the Arbitrator’s opinion after a non-binding Arbitration is used in settlement negotiations. In non-binding Arbitration, the Arbitrator issues an advisory opinion and the parties may choose whether or not to adopt it. The parties can agree to preserve their right to proceed in court if dissatisfied with the Arbitration outcome, and the Arbitrator’s opinion is not admissible in court if the matter proceeds to trial.
This solution however does not provide the finality and confidentiality that many parties are seeking when they select Arbitration or other processes of ADR.
Unlike Mediation, Arbitration requires the parties to make their case as if they were in trial, presenting admissible evidence and arguments. The parties may call witnesses, and both sides have the opportunity to review the materials provided by the other. The Arbitrator will hear statements and testimony, and review expert witness reports and physical evidence. Arbitration does provide some flexibility towards the goals of efficiency and costs savings that might not be available in court. The state and federal rules of evidence that are in many instances designed to frame the case for assessment by a jury of non-lawyers often are not strictly applied in Arbitration. The parties may be able to introduce additional relevant information that would be inadmissible at trial – or at that would take significant procedural hurdles to qualify for introduction at trial. Likewise, volumes of cumulative and expensive to present evidence can be more efficiently received by the Arbitrator.
Unlike Mediation, Arbitration does not involve a conversation between the parties toward coming to a mutual resolution. Instead, the Arbitrator acts as judge and issues a determination after the Arbitration.