The Basics of Arbitration

How it comes about and how it gets started.

image In case you are not familiar with the world of commercial arbitration, the following paragraphs will give you an overview of the process and the basics of arbitrating (and resolving) your business dispute.  (If you're already familiar with the arbitration process, we invite you to browse the other pages of our website.)

Arbitration most often comes about because a dispute has arisen among parties to a contract and their contract requires that the dispute be resolved through arbitration.  A so-called arbitration clause, usually included in the "boilerplate" part of a contract, will describe the form, rules, and requirements for arbitrating any disputes about the terms or performance of the parties to the agreement.  In many states, if arbitration is required by a written agreement then any disputes arising under the agreement must be arbitrated, and claims under the agreement cannot be taken to court in a lawsuit.

An arbitration clause may be very brief (e.g., "All disputes arising under this agreement shall be submitted to binding arbitration.") or it may be very elaborate and detailed.  It may state the rules to be used, the jurisdiction of the law to be applied, the location of the arbitration hearing, the types of claims that may or may not be made, the amount and type of damages that may be awarded, and many other specific requirements.  (Our office can help you decipher these requirements and understand more precisely what your rights and obligations are under your particular arbitration clause.)

Very often the arbitration clause in a commercial or business contract will include a requirement that any arbitration be conducted in accordance with the rules of a certain arbitration "service provider" (e.g., American Arbitration Association, JAMS, CPR, or others who are well known in the field).  Most of these companies publish commercial arbitration rules which govern the conduct of arbitrations and give direction to the parties and the arbitrator.  Unless the parties agree otherwise, the arbitrator is bound to follow the rules that are specified in the arbitration clause.  (We are prepared to conduct arbitrations under the rules of virtually all of the well known provider organizations.)

What if no service provider is named?.

If no specific service provider is named in the arbitration clause of your contract, then you are generally free to select and engage any commercial arbitrator who is acceptable to all parties to the arbitration (an "independent" arbitrator) to serve as the arbitrator in your dispute.  This arbitrator will still be bound by the rules stated in your arbitration clause (if there are any given) but will otherwise take the responsibility for enforcing the rules, for administering and managing your case, and then for hearing all the testimony and evidence and making a final ruling or award in the matter.

An independent arbitrator will very likely consult with the parties (and their lawyers) to be certain that the rules and procedures to be followed are acceptable to all participants.  This will usually take place during a "preliminary hearing," when the formalities of the arbitration will be discussed and mutually agreed by all parties.  (As an independent arbitrator, Paul Bent is experienced in arbitrating cases both with service providers handling case administration — particularly AAA — and without the formal participation of service providers — managing cases through our office.)


The Results of Arbitration

What you get out of arbitration when it's all said and done.
image During an "evidentiary hearing," which is attended by all parties and their lawyers, the arbitrator will consider written documents and agreements, hear oral testimony given under oath by witnesses, and take into account all other properly admitted evidence submitted by the parties.  The evidentiary hearing is somewhat similar to a trial in court, but there is generally less of the court formality and the hearing is conducted completely in private.  If the parties choose, the hearing may be recorded by a law reporter and a written transcript may be produced.  Following the hearing, and based upon all the evidence properly submitted by the parties, the arbitrator will determine the facts of the case — very much as a jury would do during a court trial.

Finally, the arbitrator will study and take into account all of the law which applies to the facts and, after due consideration, will render an award (similar to a verdict) which states which party prevails in the matter and what damages (if any) they are entitled to receive from the other party or parties.  The arbitrator's award may later be confirmed by a court, after which it becomes enforceable against the losing party just as though it were a court judgment.