Arbitration
Arbitration is an example of an Alternative Dispute Resolution that is done as an alternative to litigation. This, therefore, means that it is less formal than the court and the rules applied are less strict than those that are used in court proceedings. Arbitration is mostly used in the business world to avoid the time and the expenses used in court cases but still get formal verdicts. Arbitration is used in employment clauses, credit card agreements, and other forms of contracts, for example.
In the process of arbitration, a third neutral party is brought in to preside over the conflict of the parties. The arbitrator is not necessarily a lawyer, they can be experts in the field in which the dispute is based. Moreover, the parties are the ones that choose the arbitrator. The third-party hears the arguments presented by the two parties, critiques them then makes a decision on behalf of the two. Arbitration comes in two forms, that is, binding and non-binding, In the binding type of arbitration, the arbitrary reward, that is, the verdict rendered, is considered to be final and can also be used in future for court jurisdiction. In the non-binding arbitration, however, the closing decision can be appealed if either of the parties is not comfortable with it. The events of the arbitration are also not counted as formal pieces of evidence in court proceedings. In the United States, the official body in charge of arbitration is known as the American Arbitration Association (AAA) (Kellor, 23).
Arbitrations are strictly consensual. The commencement of arbitration is marked by when one party delivers a demand for arbitration to the AAA. The body then notifies the other party of the submission and gives it a deadline to agree to the arbitration. The process of arbitration can also be decided for future disputes through an arbitrary clause. The clause consequently binds the two groups, which mostly between an employer and an employee, to arbitration if a dispute occurs between them.
After the submission agreement, the conflicting parties look for an arbitrator through the roster of arbitrators provided by the AAA (Karlston, 631). The arbitrator of the case has to be a specialist in the field of conflict to ensure the dissemination of quality judgement. Thereafter, the arbitrator holds a preliminary meeting with the parties to outline the matters revolving around the case and most importantly explain to the parties how the process is going to be carried out. The groups also get to decide on the venue of the process and the laws to be applied during the arbitration. The group then prepares to present their case while adequately organizing their shreds of evidence and properly formulating their arguments against the other team. Both parties then make a hearing in the presence of the arbitrator. Usually, only one case is heard, but in more complex cases then it can be heard severally. The parties then present any additional information, which could be documentations, depending on the arbitrator. A decision is then made by the arbitrator.
Advantages
Considering the popularity of arbitration methods today, companies are becoming more and more aware of the advantages and the disadvantages of arbitration of methods today. Some of them include the time allocation, cost, informality, privacy, the power of autonomy, relevance in other states, and the sense of finality.
The process of arbitration takes up less time than in the court proceedings. Some of the arbitrary meetings are usually decided within one hearing which makes them much faster. Most cases usually get a jurisdiction 12 months after the lawsuit is filled. A research done by the American Arbitration Association showed that the amount of time used in the process of arbitration was four times faster than the litigation process (Mazirow, 10). The research attributed this efficiency to the fewer number of hearings that are required to make a decision, unlike the several numbers of hearings that were needed by a court to make the final verdict. Arbitrary processes are therefore more convenient because the parties deal directly with the arbitrator which therefore saves on the time to be used.
The costs of arbitration are also much lower as compared to court cases. These costs are determined by the complexity of the situation at hand, that is, the compactness of the problem, and the magnitude of prowess needed from the arbitrator. Some of the costs that are paid in the process of arbitration include; administrative fees which consist of the fee required for the filling the case and the overall fee for hearing the case. There is the arbitrator compensation which is dependent on the amount of work being done by the arbitrator. How an arbitrator is paid is mainly dependent on what is agreed. They can be paid per hour, per day, or sometimes per hearing. This payment is much lower than what it would cost to pay expert witnesses in a court trial. Another cost in the process of arbitration id the arbitrator expenses which constitutes the expenses that the arbitrator incurs during the case. If he has to travel, the team has to organize and cater for any meals, travelling tickets, for example. Other costs such as hiring the place in which the process is to take place and also witnesses expenses may also be incurred along the way. Some of the times the parties in dispute agree to split the cost of the whole process which makes it even cheaper. The cost of preparing for the arbitration process is also lower than in a judicial court because of the more relaxed rules that require fewer resources from the parties. In conclusion, the total costs that are spent in the process of arbitration are much lower than when a judicial jurisdiction is sought.
The second advantage in the arbitration process is the informality it entails. Unlike court proceedings where the rulings have to be made in a court of law, the arbitration process can be done in any form of setting that the two parties agree upon. Furthermore, in arbitration, the type of language to be used during the process can be negotiated upon by the two parties (Edwards, 42). This is unlike in the case of court proceedings where the official language of the party that filed the case is used automatically. This advantage comes in handy in the case where the parties in dispute are from different countries. Arbitrary processes consequently have lesser restrictions that make the process more negotiable for the parties.
Thirdly, arbitration is more private than court proceedings. The proceedings and the arbitrary reward are not accessible to the public which therefore makes them more confidential. This is important in situations where the parties wish to keep the matter private because of the risk of destroying reputation or perhaps the retention of some information that may be personal. Court proceedings on the hand can be accessible by any member of the public which therefore renders it non-confidential.
Arbitration offers the parties more autonomy unlike in formal court proceedings. Arbitration gives power to the parties to choose their arbitrator or the tribunal to preside over the case. In a court jurisdiction, however, one is not at will to decide on the judge that they would like to listen to their case. This is most important in the case where expert advice is needed.
Lastly, arbitrary rewards can be enforced in other countries with the presence of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards which is also known as the New York Convention (Patocchi, 24). The United Nations bill was passed in 1958 which allowed contracting states to allow companies to carry out arbitration meetings and also enforce arbitrary rewards within the states.
Arbitration also gives finality to the cases as compared to the court cases which are often appealed which further lengths the process of getting the final verdict. Moreover, there are very few systems that provide for the appealing of the arbitrary awards. This is sometimes an advantage because they save on the time that would have been used to get the final decision.
Disadvantages
The most profound disadvantage of arbitrary processes is that it does not allow for appealing of the arbitrary award. The parties, therefore, give up their ability to turn to a court for reverting the decision that is made by the arbitrator. It is only in very few cases when a court can decide to overrule the decision made by the arbitrator. This includes; when the arbitrator is proved to have been corrupted or under the influence of some internal or external source, or rather if they overstepped their authority in presiding over the case. This is however more difficult because the arbitrator has more power to the court judge. Arbitration, therefore, denies the parties the power to undo the decision if they feel that it was wrongly made.
Although the informality of arbitration lowers the costs of the process, it also poses disadvantages such as fewer evidence from which the case is judged and inadequate procedures for making the verdict. In the case where the witnesses only provide documents for their testimony, there is no room for the cross-examination which would have revealed more information for accurate judging of the case (Jiang-Schuerger, 231). There is, therefore, more evidence left out that would have made a difference in the type of the verdict passed by the arbitrary. Similarly, the relaxation of laws in the arbitration process creates room for the consideration of pieces of evidence that would not have been considered in a court of law or vice versa. The court outlines specific rules on how information given to the court should be handled, which ones should be considered, and which ones should be rendered redundant. The arbitration process, however, does not have this framework of judgement. It is, therefore, easier for the arbitrator to make a analyze wring information an make an erroneous decision from the case.
Thirdly, the frontiers used by the arbitrator to judge the case are not known. Unlike the court which is fixated on following the laws that govern the land, the arbitrator makes his or her decision based on the level of fairness to be achieved from each party (Mazirow, 14). The group that would have benefited more from the strict laws are therefore disadvantaged. While a judge makes a decision based on the law, an arbitrator makes a decision based on the level of equity which can sometimes be from a point of bias. According to Aristotle, arbitration was created to exercise the full power of equity, and not only focus on the law. The decisions made through arbitration can, therefore, be considered invalid because of the lack of standards that outline how the arbitrator should perceive the information he is given. Furthermore, the arbitrator does not provide background information of the arbitrary reward, and therefore creating more room for bias in the making of the decision. The limited transparency in the making of the decision consequently raises doubts in the legitimacy of the decision made.
While arbitration is less expensive than court proceedings, it may be more expensive in the case where the situation is more complicated. In a scenario where the arbitrator has to travel abroad for example, then there is a lot of expenses incurred in maintaining his upkeep during the travel period. Arbitrary cases are therefore only applicable if the case is a simple one, not needing expert witnesses or the excessive interrogation.
Not all countries fall under the New York Convention Act, which means that some of the countries do not allow for the enforcement of arbitrary awards (Patocchi, 25). The legal systems of such countries do not provide conducive for arbitrative processes. This, therefore, means that arbitration is only confined to countries such as the United States which enforce arbitrary decisions with equal effect to the court rulings.
Another disadvantage posed by arbitration processes is that they provide little or no discoveries. Discovery refers to the process in which the opposing party or sometimes an external party provides a specific document or shreds of evidence to help in the making of the decision (Edwards, 48). Due to this, most arbitrary decisions require that the parties discover litigation first. It is however often too late to turn to arbitration to lower the costs during this time.
Conclusion
Arbitration is one of the best ways to avoid the formalities and the prolonged time used in a court of law to make a decision. It is different from the court system in that it used more relaxed laws, and that it is more autonomous. Arbitration is however different from other methods such as negotiation than mediation are more informal, less binding and are considered voluntary processes. Arbitration, therefore, helps in the introduction of formality into the case to gain as much as what would have in the case of a court process. Like any other process, it has its pros and cons. Some of the benefits of arbitration include the little time it entails, reduced costs, informality, confidentiality, the autonomy it gives to the parties, its applicability in other states, and the sense of finality through its binding characteristics. Arbitration, however, has some limitations, for example, the inability to appeal the decision made, provision of fewer evidence, lack of a standard measure, may be costly at times and also limits the discovery in the cases. It is therefore important that companies be aware of these advantages and disadvantages before opting for arbitration method to solve their disputes.
Work Cited
Carlston, K. S. (1952). Theory of the arbitration process. Law and Contemporary Problems, 17(4), 631-651.
Edwards, Harry T. “Advantages of Arbitration Over Litigation-Reflections of a Judge.” (2016).
Jiang-Schuerger, Di. “Perfect arbitration= arbitration+ litigation.” Harv. Negot. L. Rev. 4 (1999): 231.
Kellor, Frances. American arbitration: Its history, functions and achievements. Beard Books, 1999.
Mazirow, Arthur. “The advantages and disadvantages of arbitration as compared to litigation.” Retrieved on June 24 (2008): 2014.
Patocchi, Paolo Michele. “Convention on The Recognition and Enforcement of Foreign Arbitral Awards.” United Nations Conference on International Commercial Arbitration. 2016.