Arbitration is an adversarial process where a neutral arbitrator renders a decision, called an award, after there has been a presentation of evidence. Like a court trial, arbitration may include representation by counsel, pre-hearing discovery, written briefs, examination of witnesses and oral argument.
The advantages of process arise from the ways in which arbitration differs from a court trial. First, arbitration procedures are flexible and less formal. This flexibility can lead to significant cost savings in terms of time and expense. Another benefit is that the parties can choose their arbitrator directly which enables them to pick someone with the requisite amount of experience and subject matter expertise to render an accurate award. Finally, the arbitration process is private and confidential, and usually final.
The parties may become involved in the arbitration process in one of three ways: court ordered, contractual or by stipulation. In a court ordered arbitration, the judge has ordered the parties to arbitrate based upon certain aspects of their dispute. The court itself sponsors an arbitration program and will facilitate the process. Court ordered arbitrations are non-binding, meaning that either party that is dissatisfied with the award of the arbitrator may request a new trial. Since the process is non-binding, no party has given up any constitutional rights by engaging in arbitration.
Contractual arbitration and arbitration by stipulation are private and binding. Here, the parties have chosen to go to arbitration instead of through a court trial. There is no appeal process in traditional arbitration and thus the award of the arbitrator is final except for the most extraordinary circumstances. In contractual arbitration the parties have agreed pursuant to a contract between them that in the event of a dispute, the matter will be arbitrated. Generally there will be a set of rules or procedures incorporated into the arbitration clause that dictate how the parties will proceed. Under an arbitration by stipulation scenario the parties have agreed to arbitrate after the dispute has arisen. The parties must then choose which set of rules and procedures to follow to guide the proceedings.
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