Arbitration Overview
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Arbitration, unlike negotiation and mediation, is a very formal process. That said, there are a great number of ways in which the arbitration process may proceed, only a few of which can be discussed in detail as part of this course.
The most obvious, and most important, difference between arbitration and mediation is that in arbitration we have a neutral who settles the matter for the parties. Similar to a court, the arbitrator has the power to decide who shall pay, and how much, and the parties are then bound to that arbitrator’s decision.
EXAMPLE (1): Joey and Raymond enter into voluntary mediation. At the end of the day they still do not see eye-to-eye. Mediation ends and the court trial begins.
EXAMPLE (2): Walter and Donald enter into voluntary arbitration. At the end of the day they still do not see eye-to-eye. The arbitrator makes a decision as to damages, and the matter is settled. Walter and Donald must live with the arbitrator’s award.
Arbitration can be entered into voluntarily after a conflict arises. Parties can also include an arbitration clause in a contract, essentially stating that they agree to arbitrate any future conflicts.
There are many permutations of arbitration in use today – some experimental, others becoming commonplace. Court-annexed arbitration, sometimes referred to as judicial arbitration, is a process by which courts divert certain cases to arbitration rather than trial. Most court systems today have such programs in place. High-low arbitration is a process by which parties can set minimum and maximum amounts to be awarded (a novel idea in common use today, which will be discussed in Chapter 7).
Despite its binding nature, not all arbitration proceedings end disputes with finality. Court-annexed arbitration often permits parties to seek trial after arbitration, and procedural and substantive irregularities give rise to lawsuits over the arbitration itself. In addition to specific case-studies, by the end of this course you will have a solid understanding of the most common forms of arbitration and the issues which come up before, during, and after these proceedings.