Arbitration in the context of law is a form of Alternative dispute resolution — specifically a legal alternative to litigation whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing) to a neutral third party (the arbitrator(s) or arbiter(s) for resolution.
Arbitration may also serve a distinct purpose: as an alternative to strikes and lockouts as a means of resolving labor disputes. Labor arbitration comes in two varieties: interest arbitration which provides a method for resolving disputes about the terms to be included in a new contract when the parties are unable to agree and grievance arbitration which provides a method for resolving disputes over the interpretation and application of a collective bargaining agreement.
Agreements to arbitrate were not enforceable at common law, though an arbitrator’s judgment was usually enforceable (once the parties had already submitted the case to him or her). During the Industrial Revolution, this situation became intolerable for large corporations. They argued that too many valuable business relationships were being destroyed through years of expensive adversarial litigation, in courts whose strange rules differed significantly from the informal norms and conventions of businesspeople (the private law of commerce, or jus merchant). Arbitration appeared to be faster, less adversarial, and cheaper.
The result was the New York Arbitration Act of 1920, followed by the United States Arbitration Act of 1925. The USAA is now known as the Federal Arbitration Act. Thanks to the subsequent judicial expansion of the meaning of interstate commerce, the U.S. Supreme Court reinterpreted the FAA in a series of cases in the 1980s and 1990s to cover the full scope of interstate commerce. In the process, the Court held that the FAA preempted many state laws covering arbitration, some of which had been passed by state legislatures to protect their consumers against powerful corporations.
Since Commercial Arbitration is based upon either contract law or the law of treaties, the agreement between the parties to submit their dispute to arbitration is a legally binding contract. All arbitral decisions are considered to be “final and binding.” This does not, however, void the requirements of law. Any dispute not excluded from arbitration by virtue of law (e.g. criminal proceedings) may be submitted to arbitration.
Arbitration can be carried out between private individuals, between states, or between states and private individuals. In the case of arbitration between states, or between states and individuals, the Permanent Court of Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) are the predominant organizations.
Arbitration is also used as part of the dispute settlement process under the WTO Dispute Settlement Understanding. International arbitral bodies for cases between private persons also exist, the International Chamber of Commerce Court of Arbitration being the most important. The American Arbitration Association is a popular arbitral body in the United States. Arbitration also exists in international sport through the Court of Arbitration for Sport.
A growing trend among employers whose employees are not represented by a labor union is to establish an organizational problem-solving process, the final step of which consists of arbitration of the issue at point by an independent arbitrator, to resolve employee complaints concerning application of employer policies or claims of employee misconduct. Employers in the United States have also embraced arbitration as an alternative to litigation of employees’ statutory claims, e.g., claims of discrimination, and common law claims, e.g., claims of defamation.
Some state court systems have prolonged court-ordered arbitration; family law (particularly child custody) is the most prominent example. Judicial arbitration is often merely advisory, serving as the first step toward resolution, but not binding either side and allowing for trial de novo.
Various bodies of rules have been developed that can be used for arbitration proceedings. The two most important are the UNCITRAL rules and the ICSID rules. The rules to be followed by the arbitrator are specified by the agreement establishing the arbitration.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Done at New York, 10 June 1958; Entered into force, 7 June 1959; 330 U.N.T.S. 38, 1959) provides for the enforcement of foreign arbitral awards on the territory of the contracting parties. Similar provisions are contained in the earlier Convention on the Execution of Foreign Arbitral Awards (Done at Geneva, 26 September 1927; Entered into force, 25 July 1929; L.N.T.S. ???).
Some jurisdictions have instituted a limited grace period during which an arbitral decision may be appealed against, but after which there can be no appeal. In the case of arbitration under international law, a right of appeal does not in general exist, although one may be provided for by the arbitration agreement, provided a court exists capable of hearing the appeal.
When arbitration occurs under U.S. law, either party to an arbitration may appeal from the arbitrator’s decision to a court, however the court will generally not change the arbitrator’s findings of fact but will decide only whether the arbitrator was guilty of malfeasance, or whether the arbitrator exceeded the limits of his or her authority in the arbitral award or whether the award conflicts with positive law. The Supreme Court has described the standard of review as one of the narrowest known to Western jurisprudence.
Critics of Arbitration argue that Contractual Requirements to arbitrate can be unfair to employees or consumers who have no power to negotiate what is often a form contract. In these cases, the choice of arbiter may be spelled out in a contract. The arbitration panel may contain industry experts who may be more sympathetic to the industry than to the individual.
Also, some have argued that the fact that an arbitration company may handle many cases for a corporation while an individual rarely goes through arbitration twice may bias the arbitrators in favor of the company. On this note, many arbitration companies have these corporations as their sole source of income, further biasing their judgments. The fact that most arbitral procedures are not public, and that there may be no provision for an individual to be represented by counsel, may also work to the disadvantage of the individual. These potential disadvantages make the ethics and professionalism of arbitrators even more important.
Arbitration in the U.S. has has also been criticized because of the unavailability of appellate review. Although the New York and federal arbitration laws were based on the English Arbitration Law of 1898, they omitted the English provision permitting for de novo review of questions of law. Thus, American courts can overturn arbitral rulings only for extremely gross procedural errors that violate due process, but cannot reverse most substantive errors.
Unlike judicial opinions, arbitration opinions are often confidential. As a result, the law relating to activities (such as reinsurance contracts and certain types of securities industry disputes) where contracts to arbitrate are widespread may develop more slowly because the usual process of creating precedent is not available.
Arbitrators are not bound by precedent and have great leeway in such matters as active participation in the proceedings, accepting evidence, questioning witnesses, and deciding appropriate remedies. Arbitrators may visit sites outside the hearing room, call expert witnesses, seek out additional evidence, decide whether or not the parties may be represented by legal counsel, and perform many other actions not normally within the purview of a court. It is this great flexibility of action, combined with costs usually far below those of traditional litigation, which makes arbitration so attractive.
Arbitrators have wide latitude in crafting remedies in the arbitral decision, with the only real limitation being that they may not exceed the limits of their authority in their award. An example of exceeding arbitral authority might be awarding one party to a dispute the personal automobile of the other party when the dispute concerns the specific performance of a business-related contract.
It is open to the parties to restrict the possible awards that the abitrator can make. If this restriction requires a straight choice between the position of one party or the position of the other, then it is known as Pendulum Arbitration or Final Offer Arbitration. It is designed to encourage the parties to moderate their initial positions so as to make it more likely they receive a favourable decision.
No definitive statement can be made concerning the credentials or experience levels of arbitrators, although some jurisdictions have elected to establish standards for arbitrators in certain fields. Several independent organizations, such as the American Arbitration Association, offer arbitrator training programs and thus in effect, credentials. Generally speaking, however, the credibility of an arbitrator rests upon reputation, experience level in arbitrating particular issues, or expertise/experience in a particular field. Arbitrators are generally not required to be members of the legal profession.
To ensure Effective Arbitration and to increase the general credibility of the arbitral process, arbitrators will sometimes sit as a panel, usually consisting of three arbitrators. Often the three consist of an expert in the legal area within which the dispute falls (such as contract law in the case of a dispute over the terms and conditions of a contract), an expert in the industry within which the dispute falls (such as the construction industry, in the case of a dispute between a homeowner and his general contractor), and an experienced arbitrator.
Arbitration is an agreement to submit a dispute for a hearing and binding decision by a third party, an arbitrator who is either a judge or a court. In other words, it is a process of resolving disputes by referring it to the third party which is selected by the other parties.
The American arbitration is a private corporation which provides a wide range of legal services. It is basically a form of alternative dispute resolution (ADR). There are few people who get confused with the term arbitration. Well it is often misunderstood with mediation. Mediation is basically an informal process of bringing in a third party who enters between the disputing parties to help them resolve a dispute.
The most important thing to be noted in arbitration is that it may be done by one person and arbitration is commonly used for the resolution of commercial matters. Arbitration can either be binding or non-binding or can be voluntary or mandatory. Parties usually prefer arbitration to resolve their disputes because of a number of advantages over judicial proceedings.
One of the most obvious reasons is that arbitration is more flexible and cheaper for businesses and is often faster than litigation in court.
We have a team of experts of Arbitration attorneys who can help you handle any type of cases and arbitration lawyers who are knowledgeable enough to answer any questions you might have. We ensure the best possible services and promise no complaints.
Mediation is a process of Alternative Dispute Resolution in which a neutral third party, the mediator, assists two or more parties to help them negotiate an agreement, with concrete effects, on a matter of common interest; lato sensu is any activity in which an agreement on any matter is researched by an impartial third party, usually a professional, in the common interest of the parties involved.
Mediation applies to different fields, with some common peculiar elements and some differences, for each of its specialties. The main fields of mediation are commerce, legal dispute and diplomacy, but forms of mediation can be found in other fields as well. Mediation in marriage is technically admitted in the category, although it follows its own peculiar history since the times of ancient Greeks.
The activity in itself is indeed very ancient, presumably started with Phoenician commerce (but its use is supposed in Babylon, too), and developed in Greece (where the mediator is called proxenetas – not in the sense of marriage mediator), then in Roman civilization, where mediation is recognised in Roman law starting from Justinian’s Digest. In Rome the mediator was called with a variety of names, including internuncius, medium, intercessor, philantropus, interpolator, conciliator, interlocutor, interpres, and finally mediator. During the Middle Ages, mediation was considered differently, sometimes forbidden, or its practice restricted to centralized authorities. In some cultures, it was instead a sacred figure, tributed a particular respect, partly coincident with that of traditional wise men.
Mediation is a process in which a neutral third party assists two or more persons, or stakeholders, to find mutually-agreeable solutions to difficult problems.
Mediation is employed at all levels and contexts, from minor disputes to global peace talks. It is thus difficult to provide a general description without referring to practices in specific jurisdictions – where ‘Mediation’ may in fact be formally defined and in some venues require specific licenses. This article attempts only a broad introduction, with more specific processes (such as peace process, binding arbitration, or mindful mediation) referred to directly in the text.
While some people loosely use the term ‘mediation’ to mean any instance in which a third party helps people find agreement, professional mediators generally believe it is essential for mediators to have thorough training, competency, and continuing education.
Types of disputes or decision-making that are often mediated include the following (though use is not limited to these areas):
Disputes involving the following issues:
The eldest branch of mediation applies to business and commerce, and still this one is the widest field of application, with reference to the number of mediators in these activities and to the economical range of total exchanged values.
The mediator in business or in commerce helps the parties to achieve the final goal of respectively buying/selling (a generical contreposition that includes all the possible varieties of the exchange of goods or rights) something at satisfactory conditions (typically in the aim of producing a synallagmatic contract), harmonically bringing the separate elements of the treaty to a respectively balanced equilibrium. The mediator, in the ordinary practice, usually cares of finding a positive agreement between (or among) the parties looking at the main pact as well as at the accessory pacts too, thus finding a composition of all the related aspects that might combine. in the best possible way, all the desiderata of his clients.
This activity is sometimes scholastically included among those of the auxiliary activities of commerce and business, but it has to be recalled that it differs from the generality of the others, because of its character of independence from the parties: in an ordinary activity of agency, or in the unilateral mandate this character is obviously missing, this kind of agent merely resulting as a longa manus of the party that gave him his (wider or narrower) power of representation.
The mediator does not obey to any of the parties, and is a third party, looking at the contraposition from an external point of view.
Subfields include specialized branches very well commonly known: in finance, in insurances, in ship-brokering, in real estate and in some other particular markets, mediators have an own name and usually obey to special laws. Generally, the mediator cannot practice commerce in the genre of goods in which he is a specialized mediator.
In the field to resolving legal controversies, mediation is an informal method of Dispute Resolution, in which a neutral third party, the mediator, attempts to assist the parties in finding resolution to their problem through the mediation process. Although mediation has no legal standing per se, agreements between the parties can (usually with assistance from legal counsel) be committed to writing and signed, thus rendering a legally binding contract in some jurisdiction specified therein.
Mediation differs from most other conflict resolution processes by virtue of its simplicity, and the clarity of its rules. It is employed at all scales from petty civil disputes to global peace talks. It is thus difficult to characterize it independently of these scales or specific jurisdictions – where ‘Mediation’ may in fact be formally defined and may in fact require specific licenses. There are more specific processes (such as Peace Process or Binding Arbitration or Mindful Mediation) referred to directly in the text.
There are numerous schools of thought relative to identifying the ‘competence’ of a mediator. Where mediators are retained by parties to provide an evaluation of the relative strengths and weaknesses of the parties, subject matter expertise of the issues in dispute is a primary aspect in determining ‘competence’.
Where mediators are expected to be process experts only (i.e., having been employed to use their skills to work through the mediation process without offering evaluations as to the parties’ claims) competence is usually demonstrated by the ability to remain neutral and to move parties though various impasse points in a dispute. International professional organizations continue to debate what ‘competency’ means. Current information can be obtained from professional associations such as the Association for Conflict Resolution.
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