Arbitration (It's not Mediation!)

Today, I am returning for a wonderful fall trip to Lewisburg, West Virginia. I had the opportunity to meet with the great folks at West Virginia Healing Home for a workshop about Restorative Justice for Children and Families in West Virginia.

Since I’m back in the office, I’ll finish out with my series on the alternatives in Alternative Dispute Resolution. Today, I’ll review at one last method, arbitration. I am reluctantly including this form of ADR since I rarely recommend arbitration. Every other option that has been included in this series maintains decision making with the parties and keeps the option of litigation open if the parties can’t reach a resolution. Arbitration requires that the parties allow a neutral third party to make a decision, without due process protections, and usually is ‘binding” to require that the parties give up their right to go to court and agree to accept an opinion by a third party, who could be described as a “private judge.” Since some businesses, employers and consumer contracts require arbitration, I am including it in the series, notwithstanding my concerns about arbitration as ADR.

Definition and Components:

An arbitrator is a bit like a referee—providing a fast and final decision.

The Mennonite Training Manual describes arbitration as "A private process conducted by one or more third parties who decide how the dispute will be resolved.  The outcome may be "binding" or "non-binding/advisory." Arbitration resembles a referee or umpire at a sporting event—it’s fast and it’s final.

Unique qualities:

Arbitration is usually private. Arbitration is often binding, and if so, this is the only process when parties waive their right to trial or access to the courts.

Steps or stages:

 Typically the parties will agree (or have previously agreed by contract) to arbitration and/or the arbitrator.  A preliminary meeting may be held when the participants identify issues and create a process to exchange necessary information before the arbitration.  The arbitrator convenes the proceeding under the rules that have been established by the arbitrator or agreed to by the participants and may be assembled in person, by telephone or video, or entirely in writing.   A briefing may be included before the announcement of the decision by the arbitrator.

Advantages:

• When a dispute is highly technical, specialized arbitrators may be uniquely well qualified.

• Faster than litigation.

• Cheaper than litigation.

• Usually confidential.

• May limit appeals and provides finality when parties are seeking a fast, final resolution.

 Disadvantages

Binding arbitration removes a litigants’ ability to seek a resolution in the courts and allows a third party to make a final decision.

• As a policy, parties may agree to arbitration in contracts long before a dispute without understanding that agreement.

• When arbitration is mandatory and binding, parties waive their right to access the courts.

• Can shift costs to one party, depending on the agreement.  

• May restrict the ability to recover attorney fees used in the process.

• Limited opportunity to have a bad decision reviewed.

• Disclosure of documents may be restricted.

• Interlocutory measures are not available.

• Enforcement will require action of the courts.

Best for: 

In consumer and labor contracts, arbitration is often included at the request of the merchant or employer. 

For more information:

 Kenneth May (editor), Elkouri and Elkouri, How Arbitration Works (8th Ed. 2017)