What Is Arbitration?

When most people think of legal disputes, they imagine expensive court battles with complicated formal procedures and lengthy delays. However, many legal disputes are resolved out of court, in arbitration. Arbitration is an alternative dispute resolution process which parties to a contract may voluntarily agree to. The court may also order that parties to a dispute have their matter dealt with by arbitration rather than formal court proceedings. In this article, we’ll explain the basics of arbitration, its advantages and disadvantages, and the role of an arbitration lawyer.

What Is Alternative Dispute Resolution?

Alternative Dispute Resolution (ADR) is the resolution of legal disputes by processes other than court litigation. Mediation, arbitration, and negotiation are all types of ADR. Generally, ADR aims to limit the length of time and cost involved in resolving a legal dispute and also helps to reduce strain on the judicial system by lessening the courts’ caseloads. Mediation and negotiation, though they involve different processes, are both used to facilitate an amicable resolution of the dispute. Arbitration, on the other hand, involves a hearing before a panel, although it is typically conducted more informally than traditional court proceedings.

What Is Arbitration?

In arbitration, a legal dispute is heard and adjudicated by a neutral arbitrator or a panel of arbitrators (as opposed to a judge or jury). In some ways, arbitration is like court proceedings: the parties will hire arbitration lawyers to file the necessary documents and argue their cases before the panel, evidence will be led, and witnesses cross-examined. After hearing the matter, the arbitration panel will issue an ‘award’.

Arbitration can be either binding – the parties are bound by the award – or non-binding – the parties are not bound by the award but may choose to abide by it. When arbitration is non-binding, the unsuccessful party may choose to file a lawsuit in the hope of achieving a different outcome. There are two main ‘routes’ to arbitration: voluntary arbitration and court-ordered arbitration.

Voluntary arbitration

As the name implies, voluntary arbitration is arbitration which the parties themselves have agreed to, usually by including an arbitration clause in their contract which stipulates that any disputes arising out of or in connection to the contract must be resolved by way of arbitration. Sometimes, parties choose to arbitrate their dispute when it arises, even if the contract regulating their relationship doesn’t include an arbitration clause.

Generally, if a contract includes an arbitration clause, the parties must arbitrate their dispute: if one party attempts to sue the other in court, the court will dismiss the case on the grounds of lack of jurisdiction, provided the parties’ dispute falls within the scope of the arbitration clause. If you are unsure whether your dispute falls within the confines of your contract’s arbitration clause, it’s best to speak to an experienced arbitration lawyer who will interpret the clause for you and advise you on your next steps.

Court-ordered arbitration

In Florida, a court may also refer a dispute to non-binding arbitration in terms of section 44.103, Florida Statutes. While the parties are bound to follow the court’s order and participate in the arbitration, the award of the arbitrator or panel is itself not binding on the parties. However, parties often choose to abide by the arbitrator’s award, as incurring further legal fees over and above the fees related to the arbitration is very costly.

The Advantages Of Arbitration

Businesses are increasingly choosing to include arbitration clauses in their contracts, and arbitration is growing in popularity both in Florida and around the world. As any arbitration lawyer will tell you, arbitration has several advantages which make it more attractive than court litigation.

Confidentiality

Firstly, arbitration is private, which means any documents filed in the proceedings, the hearing itself, and the arbitrator’s award must usually be kept confidential. Some businesses prefer this because the hearing may involve evidence relating to trade secrets and other sensitive information.

Duration

Generally, arbitration is a faster dispute resolution process than court litigation. Court backlogs mean that parties must often wait months or years to get a hearing date and receive judgment. With arbitration, the parties must simply decide how much time they wish to allocate exchanging papers and gathering evidence, and then work around the arbitrator’s schedule to select a hearing date. Arbitration is also less formal than court proceedings, and opportunities to request discovery are more limited, so preparation for the hearing will generally be quicker.

Cost

Arbitration is also usually cheaper than court litigation. Though the parties will have to share the cost of the arbitrator’s fee, the shorter duration of the process means that they are likely to be left with lower legal costs overall.

Expertise of the panel

In some cases, parties will be able to choose an arbitrator who has a specific skill set that better positions them to understand the nature of the dispute and make a ruling on it. For example, parties to a contract in the construction industry may prefer to appoint an arbitrator who has expertise in construction disputes or a background in engineering (something that most judges would be unlikely to have).

The Role Of An Arbitration Lawyer

Most commercial litigation attorneys also have experience acting as arbitration lawyers – indeed, some lawyers choose to specialize in arbitration and other ADR processes. An arbitration lawyer will play a similar role that attorneys play in court litigation: they will help to formulate their client’s case, gather, and present evidence, draft and file documents, and present oral arguments. They will also negotiate and agree on time-frames for the arbitration to the extent this is not already covered by the arbitration clause.