Arbitration

What is Arbitration?

The essence of arbitration is that it is an agreement between two or more parties to try to resolve a dispute outside of the court system. The parties agree upon a third party as an arbitrator who will act as a judge and jury. After giving the parties the opportunity to present their side of the story and to present any relevant documents or other evidence, the arbitrator will act as King Solomon to decide who wins and who loses.

There are usually no set rules as to how arbitration is conducted. It is typically left to the agreement of the parties. To facilitate the process, though, the parties will oftentimes agree to use the rules of an established organization like the American Arbitration Association.

There can be binding and non-binding arbitration. A “binding” arbitration generally means that the winning party can take an arbitration award to a court of law and enforce it if the losing party does not comply with the terms of the decision.

“Non-binding” arbitration refers to a situation where the parties agree to use arbitration as a forum to try to resolve their differences, but neither party is bound to comply with any decision by the arbitrator.

The Final Word

Arbitration can be a good thing, but this is not always the case. Asking the right questions will help you decide if you should agree to an arbitration clause or if you should try to negotiate your way out of it. Keep in mind that you are potentially giving up the very important right to a trial before a judge and jury so there should be good reasons for you to want to agree to arbitrate.