Arbitration is a formal method of dispute resolution involving a neutral person or entity who makes a binding decision. The neutral third party renders the decision in the form of an 'arbitration award'. An arbitration award is legally binding on both sides and enforcea…
What is Arbitration?
Key takeaways
- Arbitration resolves disputes outside of court.
- A neutral arbitrator makes a binding decision.
- Arbitration awards are enforceable in court.
- Parties can agree to non-binding arbitration.
- It's often faster and less formal than litigation.
In plain English
Arbitration is a way to settle disagreements without going to court. A neutral person, called an arbitrator, listens to both sides and makes a decision that both parties must follow. This decision is called an arbitration award and can be enforced by the courts. However, if both sides agree, they can choose to make the arbitration non-binding, meaning they don't have to follow the decision.
Why Arbitration matters
Arbitration is significant in U.S. law as it provides a quicker, often cheaper alternative to traditional court litigation. Many contracts include arbitration clauses to handle disputes efficiently. This process helps reduce court congestion and allows parties to resolve issues in a more flexible environment, which can lead to faster resolutions.
How Arbitration works in practice
In arbitration, parties typically agree to submit their dispute to an arbitrator, who is chosen by mutual consent or from a list provided by an arbitration organization. The process usually involves submitting evidence and arguments in a less formal setting than a court. After reviewing the information, the arbitrator issues an arbitration award, which is binding unless the parties agreed otherwise. This award can be enforced in court if necessary, under the Federal Arbitration Act.
Examples
Scenario: Maria and James have a contract dispute over a service provided.
Outcome: They go to arbitration, and the arbitrator decides James must pay Maria for the incomplete work.
Scenario: Aisha and her employer disagree over a termination issue.
Outcome: They choose arbitration, and the arbitrator rules in favor of Aisha, reinstating her position.
Frequently asked questions
What is arbitration?
Arbitration is a method of resolving disputes outside of court where a neutral party makes a binding decision.
Why should I choose arbitration over litigation?
Arbitration is typically faster and less expensive than going through the court system, making it an attractive option.
Can I appeal an arbitration award?
Generally, arbitration awards are final and binding, with very limited grounds for appeal under U.S. law.