Arbitration
Arbitration
is a procedure for the resolution of disputes through the appointment
of an independent arbitrator who considers the merits of a dispute
and renders a final and binding decision called an award. In this
sense, arbitration is sometimes referred to as “private court”.
In other words, it can be much like litigation, except that the
parties have mutually agreed upon the selection of a judge.
Arbitration, however, can have significant advantages. It offers the parties a large measure of control over procedural processes, evidentiary rules, and, most importantly, choice of the decision-maker. The parties may select an arbitrator with knowledge in the area where disputes have arisen. In addition, parties can choose an arbitration process that is tailor-made to their particular needs and the nature of the dispute. Finally, arbitration proceedings are usually stipulated to be confidential and are conducted in private. Members of the press and public are excluded, and no one but the parties has access to the documents filed or a transcript of the proceedings.
Arbitration can be efficient in terms of time and money. The process can be as formal or informal as the parties wish, and relaxed rules of evidence can apply, usually making process more efficient. Often, arbitration can be arranged within days or weeks and can take much less time to complete than litigation. If the arbitration process is kept simple, it can be relatively inexpensive. Finally, unless they have agreed otherwise in advance, parties to arbitration have limited rights of appeal.
In addition to full arbitration proceedings, there are variations sometimes used in special situations where the ultimate issue in dispute simply involves the dollar amount that one side will pay to the other. These variations are sometimes referred to as final offer selection or “baseball” arbitration, after the way that some salaries are determined in the major leagues. In advance of the hearing, each party submits its best offer to the other party and to the arbitrator. After hearing the parties’ cases, the arbitrator selects the offer considered the most reasonable as the binding award. The arbitrator cannot award an amount in between the two offers, so there is no splitting of the baby. This forces each party to think long and hard about its final offer, since each wants to been seen as most reasonable in the eyes of the arbitrator.
In another variation of this method, sometimes referred to as “night-time baseball” arbitration, the arbitrator is kept in the dark as to the final offers exchanged, until after a decision is rendered. Then, the final offer closest to the arbitrator's award is the amount paid. For example, if one party’s final offer is to pay $500,000 and the other party agrees to accept no less than $1,000,000 and the arbitrator, without any knowledge of these final positions, makes an award of $650,000 the claimant will receive only $500,000 since that is the amount closest to the award. If the arbitrator's award is $751 or higher, the claimant will receive $1,000,000 since the award is at least $1 closer to the higher amount than to the lower.
Arbitration, however, can have significant advantages. It offers the parties a large measure of control over procedural processes, evidentiary rules, and, most importantly, choice of the decision-maker. The parties may select an arbitrator with knowledge in the area where disputes have arisen. In addition, parties can choose an arbitration process that is tailor-made to their particular needs and the nature of the dispute. Finally, arbitration proceedings are usually stipulated to be confidential and are conducted in private. Members of the press and public are excluded, and no one but the parties has access to the documents filed or a transcript of the proceedings.
Arbitration can be efficient in terms of time and money. The process can be as formal or informal as the parties wish, and relaxed rules of evidence can apply, usually making process more efficient. Often, arbitration can be arranged within days or weeks and can take much less time to complete than litigation. If the arbitration process is kept simple, it can be relatively inexpensive. Finally, unless they have agreed otherwise in advance, parties to arbitration have limited rights of appeal.
In addition to full arbitration proceedings, there are variations sometimes used in special situations where the ultimate issue in dispute simply involves the dollar amount that one side will pay to the other. These variations are sometimes referred to as final offer selection or “baseball” arbitration, after the way that some salaries are determined in the major leagues. In advance of the hearing, each party submits its best offer to the other party and to the arbitrator. After hearing the parties’ cases, the arbitrator selects the offer considered the most reasonable as the binding award. The arbitrator cannot award an amount in between the two offers, so there is no splitting of the baby. This forces each party to think long and hard about its final offer, since each wants to been seen as most reasonable in the eyes of the arbitrator.
In another variation of this method, sometimes referred to as “night-time baseball” arbitration, the arbitrator is kept in the dark as to the final offers exchanged, until after a decision is rendered. Then, the final offer closest to the arbitrator's award is the amount paid. For example, if one party’s final offer is to pay $500,000 and the other party agrees to accept no less than $1,000,000 and the arbitrator, without any knowledge of these final positions, makes an award of $650,000 the claimant will receive only $500,000 since that is the amount closest to the award. If the arbitrator's award is $751 or higher, the claimant will receive $1,000,000 since the award is at least $1 closer to the higher amount than to the lower.