Arbitration is a legal process that resolves disputes between two or more parties without taking them through the formal court system.
Many people choose arbitration as an alternative to traditional litigation because it is a less costly and time-consuming process. The most common use for arbitration is the resolution of commercial disputes, but other arbitration cases may include debt, divorce, securities and credit card arbitration.
Historians can claim with some certainty that arbitration was used as a form of dispute resolution long before the formal court system appeared.
In fact, records from ancient Egypt, Greece and Rome all point to the popularity of arbitration as a method to resolve disputes. In ancient times, however, an arbitrator was usually a person known and trusted by both parties. The more intimately this individual was known, the more confidence claimants could have in his or her judgment.
Today, we seem to favor the opposite extreme: the more impartial or disinterested the arbitrator is, the more he or she can be trusted as a qualified judge of the issue at hand. In modern law, arbitrators ideally have no relationship to either party concerned. According to the Code of Ethics for Arbitrators in Commercial Disputes:
"An arbitrator should disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality or bias."
In today''s world, arbitration can also happen online, in a process known as Online Dispute Resolution (ODR). In ODR, a claim is filed online and the proceedings occur entirely over the Internet, based on documentation presented by both parties. Currently, net-ARB.com is one of the major organizations dealing in Internet Arbitration.
To begin the process of arbitration, parties select an impartial individual (arbitrator) and agree to be bound by the arbitrators resolution or determined "award". An arbitrator is generally an expert with training in an area related to the dispute. Alternately, the arbitrator may be part of a professional arbitration agency.
One of the most commonly used agencies for arbitration is the American Arbitration Association (AAA), a private organization that deals in arbitration, mediation and other forms of alternative dispute resolution.
While the AAA does not arbitrate disputes, it provides administrative support to arbitrations and helps to assign arbitrators to cases when the parties cannot agree upon an appropriate individual to arbitrate a case.
Because arbitration is a choice made by private agreement between parties, arbitration hearings are not open to the public and awards are not considered public record. Furthermore, arbitration proceedings are not subject to judicial facilitation.
There is an exception to this rule, however, when it comes to the Federal Arbitration Act. The Federal Arbitration Act applies to cases that involve interstate commerce. Such cases are subject to the "Commerce Clause" powers given to Congress in the Constitution.
Fighting a case through the traditional American justice system can sometimes seem a daunting process. To bring a dispute to public court typically requires a considerable investment of time, money and energy. Similarly, traditional litigation can often be an emotionally draining experience for many people. For precisely these reasons, solving disputes through arbitration, rather than litigation, has become a popular option.
It''s possible to seek arbitration in pretty much any dispute that might otherwise go to the courts. Because arbitration hearings are not open to the public and proceedings are not considered public information, they can be a favorable option for cases dealing with sensitive issues. For instance, if the case in question treats information regarding bankruptcy, personal affairs or credit history, arbitration can be a way to protect individual''s privacy by avoiding the public court.
Loeb & Loeb, LLP (1999). What is an Arbitrator''s Duty of Disclosure? Retrieved March 6, 2008, from the FindLaw Web site.
U.S. Securities and Exchange Commission(2008). Arbitration. Retrieved March 6, 2008, from the U.S. Securities and Exchange Commission Web site.
American Arbitration Association (n.d.). About American Arbitration Association. Retrieved March 6, 2008, from the AAA Web site.