Arbitration - Introduction

 

            Arbitration is a legal alternative to the courts whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing) to a neutral third party (the arbitrator(s)) for resolution.

            Since arbitration is based either upon contract law or, in the case of international arbitration, 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 exists under both domestic and international law, and 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. 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.

            Moreover, when arbitration occurs under domestic law, either party to an arbitration may appeal 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. Some jurisdictions have instituted a limited grace period during which an arbitral decision may be appealed, 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.

            Some domestic jurisdictions have stipulated that judges may require either arbitration or mediation of certain disputes as a first step toward resolution, family law (particularly child custody) being a prime example.

            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 which, combined with costs usually far below those of traditional litigation, makes arbitration so attractive.

            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 offer arbitrator training programs, such as the American Arbitration Association, 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.

            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. Most collective bargaining agreements in organizations where employees are represented by a labor organization stipulate that the final step of any grievance procedure shall consist of arbitration.

            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 a device whereby the settlement of a question, which is of interest for two or more persons, is entrusted to one or more other persons, the arbitrator or arbitrators, who derive their powers from a private agreement, not the authority of a State, and who are to proceed and decide the case on the basis of such an agreement. [1] Moreover, arbitration has also been defined as a mechanism for the settlement of disputes between parties, either by a person appointed by themselves or by relying upon procedures or institutions chosen by the parties.[2] In his definition of arbitration, Robert highlights the similarity between arbitration and litigation: "Arbitration means instituting a private jurisdiction by which litigations are withdrawn from the public jurisdictions, in order to be resolved by individuals vested, for a given case, with the powers to judge such litigations.'' [3]

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[1] David, R. (1985) Arbitration in International Trade . Deventer, The Netherlands: Kluwer Law and Taxation Publishers.

 

[2] van den Horen, H. (1984) "Commercial Disputes and Their Settlement: A Factor in Business Planning" in International Arbitration: 60 Years of ICC Arbitration--A Look at the Future . ICC Publishing, Paris.

 

[3] Robert, J. (1967) Arbitrage: Civil et Commercial .  Dalloz, Paris.