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Members of the Permanent Court of Arbitration, established at The Hague in 1899 to settle (credit: Library of Congress, Washington, D.C.)

Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the arbitrator's decision. In medieval Europe arbitration was used to settle disputes between merchants; it is now commonly used in commercial, labour-management, and international disputes. The procedures differ from those used in the courts, especially regarding burden of proof and presentation of evidence. Arbitration avoids costly litigation and offers a relatively speedy resolution as well as privacy for the disputants. The main disadvantage is that setting guidelines is difficult; therefore the outcome is often less predictable than a court decision. mediation.

For more information on arbitration, visit Britannica.com.

A set of rules for allocating machine resources, such as memory or peripheral devices, to more than one user or program.

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1. Settlement of a dispute after a hearing of opposing arguments, by an arbitrator, rather than a court of law. If binding arbitration is accepted, the parties involved agree to follow the arbitrator's decision, which is binding only on the parties to the dispute, and is not a legal precedent, as is a judicial ruling. In deciding complex issues, arbitration can be a more expedient way of resolving disputes than formal litigation and adjudication before a court of law.

2. In the securities industry, a method for settling disputes between member firms, or between member firms and nonmembers. Securities arbitration generally follows rules set by the National Association of Securities Dealers, the Municipal Securities Rulemaking Board, and the securities exchanges. The opinion of a three- to five-member board of arbitration is considered final and binding. Arbitration of disputes involving broker-dealers and their customers is often part of a brokerage agreement, but can often limit a brokerage client's right to sue a broker-dealer.

The binding resolution of disputes by one or more neutral persons (usually called “arbitrators”), as a substitute for judicial proceedings; may be invoked only by agreement of the parties to the dispute, but such agreement may be arrived at before there is an actual dispute, as, for example, through a clause in a contract between them, or after a dispute has arisen. Arbitration proceedings characteristically are less formal than those in court, and the rules of evidence and most rules of substantive law that would be invoked by a court are not applied.

Arbitration is the use of an impartial third party to resolve a dispute. Unlike mediation or conciliation, in which a third party facilitates the end of a dispute by helping the negotiators find common ground, an arbitrator ends a dispute by issuing a binding settlement. Before submitting their dispute to arbitration, the parties to a dispute agree to abide by the arbitrator's ruling.

Arbitration has been used to resolve disputes for centuries. Examples from as far back as the sixth century B.C.E. affirm the use of arbitration to resolve disputes between individuals and between city-states in ancient Greece. In the Old Testament, King Solomon acted as an arbitrator to resolve a conflict between two women over the identity of a child (1 Kings 3:16–28). George Washington in 1799 provided for the use of arbitration should any disputes arise over his will.

In U.S. history, labor arbitration, to settle industrial disputes between labor unions and employers, and commercial arbitration, to settle disputes involving business and consumer transactions, have been the most extensive uses of arbitration. The development of labor arbitration stems from the government's desire to avoid strikes that threaten the public interest, while commercial arbitration results from a desire to avoid the court system.

Commercial arbitration has expanded to include international commercial arbitration and has become more widespread as participants in the legal system have explored the use of alternative dispute resolution (ADR) to reduce the costs and delays of court cases. ADR includes arbitration, mediation, and other forms of dispute resolution. A significant example is the growing trend to use arbitration instead of the courts to resolve employment disputes involving allegations of discrimination and other violations of federal and state employment laws.

The Arbitration Process

The central features of the arbitration process are generally similar regardless of the topic of the dispute. Except in some cases in which arbitration is required by law, the parties agree ahead of time, usually when drafting a contract, to submit any disputes to binding arbitration. Nearly every union contract between labor unions and employers specifies arbitration as the final step of the grievance procedure to resolve employee grievances. A typical clause in contracts between builders, architects, and owners in the construction industry might read as follows: "Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof."

Once arbitration is initiated by one of the parties, an arbitrator must be selected. If the parties have not selected an arbitrator, agencies such as the American Arbitration Association and the Federal Mediation and Conciliation Service can provide a short list of qualified arbitrators. The parties then select an arbitrator from this list, for example, by alternately striking out names. Some arbitration processes may involve a panel of arbitrators, especially in complex commercial cases. When labor arbitration involves a panel, it is common to have an impartial chairperson, one member selected by labor, and one member selected by management.

Each party to the dispute then presents its case and argues its position at a hearing. It is of utmost importance that each party receives a full and fair hearing. Witnesses and exhibits often are presented to support a case, though the strict rules of evidence used by judges are not followed. The arbitrator decides the relevance and importance of the evidence. As with a traditional court case, opening and closing statements are made, and witnesses can be cross-examined. The parties frequently are represented by attorneys.

After the hearing, the arbitrator considers all of the material and issues a ruling. In commercial arbitration, it is common for the decision to simply provide the arbitrator's resolution to the disputed issues without providing details about the arbitrator's reasoning. In labor arbitration, however, it is common for the decision to be accompanied by an opinion indicating the reasons for the decision. The opinions are often used as precedents in subsequent cases.

The parties agree ahead of time to abide by the arbitrator's ruling or award. Laws such as the Federal Arbitration Act and judicial precedent have established the authority of arbitration awards, and the scope for challenging an award in court is limited to alleged problems in the process, such as arbitrator misconduct or disregard for the contract or law. The merits of an arbitrator's decision are not subject to judicial review, and awards can be enforced by the courts.

Labor Arbitration

Labor arbitration usually resolves disputes involving labor unions, employees, and employers. It is commonly divided into two distinct categories: interest arbitration and rights arbitration.

Interest arbitration resolves conflicts of interest over the establishment of the terms and conditions of employment, for example, the wage rate, working hours, and number of vacation days for each employee. In labor relations, these terms and conditions are negotiated through collective bargaining, and agreements are formalized in collective bargaining agreements or union contracts. A breakdown in these negotiations typically results in a strike. Interest arbitration avoids or ends strikes. In the United States the development of interest arbitration can be attributed to the government's desire to protect the public interest by preventing or ending strikes in key industries during the first part of the twentieth century. In 1902, President Theodore Roosevelt ended a five-month coal strike via arbitration, and several laws provided for voluntary arbitration in the railroad industry and the appointment of boards of inquiry if interstate commerce was affected.

Interest arbitration in the private sector is voluntary, and the parties can choose arbitration as an alternative to a strike if desired. Examples have involved the apparel and steel industries as well as Major League Baseball. Congress, however, has prevented railroad strikes through arbitration, and President Bill Clinton ended a flight attendants strike at American Airlines in 1993 by persuading the parties to submit their dispute to arbitration.

In the public sector, interest arbitration is often compulsory, that is, required by law, which echoes the rationale of preventing strikes that harm the public interest. At least twenty states and the federal government deny government employees the right to strike and instead require interest arbitration. These compulsory arbitration laws are especially prevalent among occupations deemed essential, such as police officers, firefighters, and prison guards. Most interest arbitration in the United States occurs in the public sector under these compulsory statutes; private sector negotiators are generally reluctant to give up their right to strike and to turn over their decision making authority to a third party.

In contrast, rights arbitration is widely used in both private-and public-sector labor relations. Rights arbitration resolves conflicts of rights, more commonly referred to as grievances, which are disagreements over the application or implementation of an existing union contract. In other words, has a right that was granted by the contract to a specific party been violated? A common example involves the discipline and discharge of employees. Most union contracts specify that employees can only be disciplined and discharged with just cause, so grievances are frequently filed over whether or not a specific instance of discipline or discharge was consistent with the requirements of just cause. An arbitrator might rule that the discharge was consistent with just cause and therefore stands or that management violated a principle of just cause and therefore the grievant is entitled to be reinstated to his or her job, perhaps with back pay. Other examples include questions of whether or not the contractual provisions were followed in layoffs or promotions, whether or not a specific employee was eligible for vacation pay, or whether or not management has the right to subcontract work.

The widespread adoption of rights or grievance arbitration in the United States originated during World War II. This period was marked by significant growth in union membership and an obvious public interest in avoiding strikes that interrupted war production. The U.S. government, through the National War Labor Board, prompted organized labor to give up the right to strike over grievances in return for binding grievance arbitration as the final step of the grievance procedure. At the conclusion of the war, the only thing that labor and management could agree on was that grievances were best settled through a grievance procedure ending in binding arbitration rather than a strike.

Grievance arbitration was further institutionalized by the important Supreme Court decisions in Textile Workers v. Lincoln Mills (1957) and the Steelworkers Trilogy Cases (1960). In short, these decisions prohibit labor and management from ignoring an arbitration clause in their contract, provide significant legitimacy to the arbitration process, and restrict the scope of judicial review.

No-strike clauses are in 95 percent of union contracts, and clauses providing for binding arbitration to settle unresolved grievances are in nearly all contracts. Note carefully that these no-strike clauses pertain to grievances, rights disputes during the term of a collective bargaining agreement, not to interest disputes at the expiration of the agreement. This system of grievance arbitration, with its established body of precedents on just cause and other important issues, is widely recognized as a positive contribution to labor-management relations in the workplace.

However, the application of arbitration to employment disputes in the nonunion arena is contentious. A number of employment laws provide employees with rights pertaining to nondiscrimination, safety and health, family and medical leave, and other subjects. To avoid costly litigation, some employers require employees, as a condition of employment, to agree to arbitrate any future employment law disputes rather than take the employer to court.

The Supreme Court, in Gilmer v. Interstate/Johnson Lane Corporation (1991), upheld forcing an employee who agreed to binding arbitration in advance to submit his or her dispute to arbitration, but numerous legal and policy questions remained. In particular, it is central to the legitimacy of arbitration as a dispute resolution process that all parties receive due process. In light of the differences in resources between corporations and individual employees, it is debatable whether or not employees are provided with due process in this nonunion context, especially if they must waive their right to litigation as a condition of employment in advance of any dispute. This issue impacts significantly arbitration in the United States.

Commercial Arbitration

Commercial arbitration resolves disputes involving business transactions. Merchants and traders have used arbitration for centuries. The chambers of commerce of New York and other eastern cities used arbitration before 1800, though perhaps not frequently. Widespread acceptance of commercial arbitration, however, did not start until the 1920s. New York State passed a law in 1920 and Congress passed the Federal Arbitration Act in 1925, making contract clauses containing an agreement to arbitrate disputes legally binding. Also significant was the founding in 1926 of the American Arbitration Association, a not-for-profit organization that provides guidelines and assistance in using arbitration.

As a result, contracts in the United States between builders, architects, and owners in the construction industry or between cloth mills and garment manufacturers in the textile and apparel industry often have a clause specifying that disputes will be resolved through arbitration. Transactions in the real estate, financial securities, and publishing industries often include arbitration as the dispute resolution procedure. One of the largest commercial arbitration applications involves uninsured motorist claims, in which liability and damages are determined through arbitration.

While labor arbitration developed as a means for avoiding strikes, the rationale for commercial arbitration is to avoid the court system. Relative to court action, arbitration can be faster, less expensive, and more private. Moreover, arbitrators are experts in the subject matter of the dispute. Increased economic globalization and complex international business relationships combined with a reluctance to litigate disputes in a foreign court have increased adoption of arbitration to resolve international business disputes.

Bibliography

Bales, Richard A. Compulsory Arbitration: The Grand Experiment in Employment. Ithaca, N.Y.: ILR Press, 1997. Overview of arbitration to settle employment law disputes. Includes historical and contemporary developments.

Bühring-Uhle, Christian. Arbitration and Mediation in International Business: Designing Procedures for Effective Conflict Management. The Hague and Boston: Kluwer Law International, 1996.

Devinatz, Victor G., and John W. Budd. "Third Party Dispute Resolution—Interest Disputes." In The Human Resource Management Handbook, part 2. Edited by David Lewin, Daniel J. B. Mitchell, and Mahmood A. Zaidi. Greenwich, Conn.: JAI Press, 1997. Reviews the extensive research literature on interest arbitration.

Dunlop, John T., and Arnold M. Zack. Mediation and Arbitration of Employment Disputes. San Francisco: Jossey-Bass, 1997.

Elkouri, Frank, and Edna Asper Elkouri. How Arbitration Works. 5th ed. Edited by Marlin M. Volz and Edward P. Goggin. Washington, D.C.: Bureau of National Affairs, 1997. The classic treatment of grievance arbitration.

Kheel, Theodore W. The Keys to Conflict Resolution: Proven Methods of Settling Disputes Voluntarily. New York: Four Walls Eight Windows, 1999. Wisdom and examples from an experienced arbitrator and mediator.

Ponte, Lucille M., and Thomas D. Cavenagh. Alternative Dispute Resolution in Business. Cincinnati, Ohio: West Educational, 1999.

—John Budd

The submission of a dispute to an unbiased third person designated by the parties to the controversy, who agree in advance to comply with the award — a decision to be issued after a hearing at which both parties have an opportunity to be heard.

Arbitration is a well-established and widely used means to end disputes. It is one of several kinds of alternative dispute resolution, which provide parties to a controversy with a choice other than litigation. Unlike litigation, arbitration takes place out of court: the two sides select an impartial third party, known as an arbitrator; agree in advance to comply with the arbitrator's award; and then participate in a hearing at which both sides can present evidence and testimony. The arbitrator's decision is usually final, and courts rarely reexamine it. Traditionally, labor and commerce were the two largest areas of arbitration. However, since the mid-1970s, the technique has seen great expansion. Some states have mandated arbitration for certain disputes such as auto insurance claims, and court decisions have broadened its scope into areas such as securities, antitrust, and even employment discrimination. International business issues are also frequently resolved using arbitration.

Arbitration in the United States dates to the eighteenth century. Courts frowned on it, though, until attitudes started to change in 1920 with the passage of the first state arbitration law, in New York. This statute served as a model for other state and federal laws, including, in 1925, the U.S. Arbitration Act, later known as the Federal Arbitration Act (FAA) (9 U.S.C.A. § 1 et seq.). The FAA was intended to give arbitration equal status with litigation, and, in effect, created a body of federal law. After World War II, arbitration grew increasingly important to labor-management relations. Congress helped this growth with passage of the Taft-Hartley Act (29 U.S.C.A. § 141 et seq.) in 1947, and over the next decade, the U.S. Supreme Court firmly cemented arbitration as the favored means for resolving labor issues, by limiting the judiciary's role. In the 1970s, arbitration began expanding into a wide range of issues that eventually included prisoners' rights, medical malpractice, consumer rights, and many others. In 1995, at least forty-four states had modern arbitration statutes.

Arbitration can be voluntary or required. The traditional model is voluntary, and closely linked to contract law: parties often stipulate in contracts that they will arbitrate, rather than litigate, when disputes arise. For example, unions and employers almost always put an arbitration clause in their formal negotiations, known as collective bargaining agreements. By doing so, they agree to arbitrate any future employee grievances over wages, hours, working conditions, or job security — in essence, they agree not to sue if disagreements occur. Similarly, a purchaser and a provider of services who disagree over the result of a business deal may submit the problem to an arbitrator instead of a court. Mandatory arbitration is a more recent phenomenon. States such as Minnesota, New York, and New Jersey have enacted statutes that force disputes over automobile insurance claims into this forum. In addition, courts sometimes order disputants into arbitration.

In theory, arbitration has many advantages over litigation. Efficiency is perhaps the greatest. Proponents say arbitration is easier, cheaper, and faster. Proponents also point to the greater flexibility with which parties in arbitration can fashion the terms and rules of the process. Furthermore, although arbitrators can be lawyers, they do not need to be. They are often selected for their expertise in a particular area of business, and may be drawn from private practice or from organizations such as the American Arbitration Association (AAA), a national nonprofit group founded in 1926. Significantly, arbitrators are freer than judges to make decisions, because they do not have to abide by the principle of stare decisis (the policy of courts to follow principles established by legal precedent) and do not have to give reasons to support their awards (although they are expected to adhere to the Code of Ethics for Arbitrators in Commercial Disputes, established in 1977 by the AAA and the American Bar Association).

These theoretical advantages do not always hold up in practice. Even when efficiency is achieved, some critics argue, the price is a lower quality of justice, and it can be made worse by the difficulty of appealing an award. The charge is frequently made that arbitration only results in "splitting the baby" — dividing awards evenly among the parties. The AAA rebuts this claim: its 1993 statistics for construction cases show that only 11 percent of the awards were divided equally. Yet even arbitrators agree that as arbitration has become increasingly formal, it sometimes resembles litigation in its complexity. This may not be an inherent problem with the process as much as a result of flawed use of it. Parties may undermine arbitration by acting as lawyers do in a lawsuit: excessively demanding discovery (evidence from the other side), calling witnesses, and filing motions.

Ultimately, the decision to use arbitration cannot be made lightly. Most arbitration is considered binding: parties who agree to arbitration are bound to that agreement and also bound to satisfy any award determined by the arbitrator. Courts in most jurisdictions enforce awards. Moreover, they allow little or no option for appeal, expecting parties who arbitrate to assume the risks of the process. In addition, arbitration is subject to the legal doctrines of res judicata and collateral estoppel, which together strictly curtail the option of bringing suits based on issues that were or could have been raised initially. (Res judicata means that a final judgment on the merits is conclusive as to the rights of the parties and their privies, and, as to them, operates as an absolute bar to a subsequent action involving the same claim, demand, or cause of action. Collateral estoppel means that when an issue of ultimate fact has been determined by a valid judgment, that issue cannot be relitigated between the same parties in future litigation.) Thus, often the end is truly in sight at the conclusion of an arbitration hearing and the granting of an award.

The FAA gives only four grounds on which a court may vacate, or overturn, an award: (1) where the award is the result of corruption, fraud, or undue means; (2) where the arbitrators were evidently partial or corrupt; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing or hear pertinent evidence, or where their misbehavior prejudiced the rights of any party; and (4) where the arbitrators exceeded their powers or imperfectly executed them so that a mutual, final, and definite award was not made. In the 1953 case Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168, the U.S. Supreme Court suggested, in passing, that an award may be set aside if it is in "manifest disregard of the law," and federal courts have sometimes followed this principle. Public policy can also be grounds for vacating, but this recourse is severely limited to well-defined policy based on legal precedent, a rule emphasized by the Supreme Court in the 1987 case United Paperworkers International Union v. Misco, 484 U.S. 29, 108 S. Ct. 364, 98 L. Ed. 2d 286.

The growth of arbitration is taken as a healthy sign by many legal commentators. It eases the load on a constantly overworked judicial system, while providing disputants with a relatively informal, inexpensive means to solve their problems. The greatest recent boost to arbitration came from the U.S. Supreme Court, which held in 1991 that age discrimination claims in employment are arbitrable (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26). Writing for the majority, Justice Byron R. White concluded that arbitration is as effective as a trial for resolving employment disputes. Gilmer has led several major employers to treat all employment claims through binding arbitration, sometimes as a condition of employment.

An informal hearing regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process.

Investopedia Says:
We frequently hear this term when professional sports teams are negotiating contracts with their athletes. Typically, one party aims unrealistically high and the other one aims really low, and the settlement occurs somewhere in the middle.

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The settling of disputes (especially labor disputes) between two parties by an impartial third party, whose decision the contending parties agree to accept. Arbitration is often used to resolve conflict diplomatically to prevent a more serious confrontation.

LearnThatWord.com is a free vocabulary and spelling program where you only pay for results!

• Acts, Powers, Conditions, and Procedures - arbitration: hearing or judgment of controversy by statutorily appointed body
• Laws, Procedures, and Court Proceedings - arbitration: investigation and resolution of dispute by persons named by involved parties, usu. agreed on in contract as way to settle dispute without formal court trial
• Labor - arbitration: negotiation between management and labor mediated and decided by neutral third party
• Baseball - arbitration: a method to determine salary disputes between players and teams where both parties submit a salary and following a hearing a third party decides which salary will prevail
• Judgments and Critiques - arbitration: act of hearing and determining the outcome of a controversy by a mediator

It has been suggested that List of international arbitration books be merged into this article or section. (Discuss) Proposed since November 2011.

Not to be confused with Arbitrage.

For Wikipedia's arbitration policy, see Wikipedia:Arbitration/Policy.

Alternative Dispute Resolution
Arbitration Conciliation Mediation Negotiation Collaborative law Conflict resolution Dispute resolution Lawyer supported mediation Party-directed mediation Restorative justice
v t e

Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a resolution technique in which a third party reviews the evidence in the case and imposes a decision that is legally binding for both sides and enforcable.^[1] Other forms of ADR include mediation^[2] (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts.

Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is similar to mediation in that a decision can not be imposed on the parties. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable. By one definition arbitration is binding and so non-binding arbitration is technically not arbitration.

Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards. Arbitration is not the same as:

• judicial proceedings, although in some jurisdictions, court proceedings are sometimes referred as arbitrations^[3]
• alternative dispute resolution (or ADR)^[4]
• expert determination
• mediation

Contents 1 Advantages and disadvantages 2 Arbitrability 3 Arbitration agreement 4 Sources of law 5 Arbitral tribunal 5.1 Duties of the tribunal 6 Arbitral awards 6.1 Enforcement of arbitration awards 6.1.1 Arbitration with sovereign governments 6.2 Challenge 6.3 Costs 7 Nomenclature 8 See also 9 Notes 10 References 10.1 International Arbitration 11 External links

Advantages and disadvantages

Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:

• when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation)^[5]
• arbitration is often faster than litigation in court )^[6]
• arbitration can be cheaper and more flexible for businesses^{[citation needed]}
• arbitral proceedings and an arbitral award are generally non-public, and can be made confidential^[7]
• in arbitral proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied
• because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments
• in most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability

Some of the disadvantages include:

• arbitration may become highly complex^{[citation needed]}
• arbitration may be subject to pressures from powerful law firms representing the stronger and wealthier party^{[citation needed]}
• arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees often do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job
• if the arbitration is mandatory and binding, the parties waive their rights to access the courts and to have a judge or jury decide the case
• in some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes^{[citation needed]}
• in some arbitration agreements and systems, the recovery of attorneys' fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation^{[citation needed]}; however most arbitration codes and agreements provide for the same relief that could be granted in court
• if the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee
• there are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned
• although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
• in some legal systems, arbitrary awards have fewer enforcement options than judgments; although in the United States arbitration awards are enforced in the same manner as court judgments and have the same effect
• arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of member or a small group of members in arbitration due to increasing legal fees, without explaining to the members the adverse consequences of an unfavorable ruling
• rule of applicable law is not necessarily binding on the arbitrators, although they cannot disregard the law^{[citation needed]}
• discovery may be more limited in arbitration or entirely nonexistent
• the potential to generate billings by attorneys may be less than pursuing the dispute through trial
• unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award
• although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought^{[citation needed]}, thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.

Arbitrability

By their nature, the subject matter of some disputes is not capable of arbitration. In general, two groups of legal procedures cannot be subjected to arbitration:

• Procedures which necessarily lead to a determination which the parties to the dispute may not enter into an agreement upon:^[8] Some court procedures lead to judgments which bind all members of the general public, or public authorities in their capacity as such, or third parties, or which are being conducted in the public interest. For example, until the 1980s, antitrust matters were not arbitrable in the United States.^[9] Matters relating to crimes, status and family law are generally not considered to be arbitrable, as the power of the parties to enter into an agreement upon these matters is at least restricted. However, most other disputes that involve private rights between two parties can be resolved using arbitration. In some disputes, parts of claims may be arbitrable and other parts not. For example, in a dispute over patent infringement, a determination of whether a patent has been infringed could be adjudicated upon by an arbitration tribunal, but the validity of a patent could not: As patents are subject to a system of public registration, an arbitral panel would have no power to order the relevant body to rectify any patent registration based upon its determination.
• Some legal orders exclude or restrict the possibility of arbitration for reasons of the protection of weaker members of the public, e.g. consumers. Examples: German law excludes disputes over the rental of living space from any form of arbitration^[10], while arbitration agreements with consumers are only considered valid if they are signed by either party,^[11] and if the signed document does not bear any other content than the arbitration agreement.^[12]

Arbitration agreement

See also: Arbitration clause

In theory, arbitration is a consensual process; a party cannot be forced to arbitrate a dispute unless he agrees to do so. In practice, however, many fine-print arbitration agreements are inserted in situations in which consumers and employees have no bargaining power. Moreover, arbitration clauses are frequently placed within sealed users' manuals within products, within lengthy click-through agreements on websites, and in other contexts in which meaningful consent is not realistic. Such agreements are generally divided into two types:

• agreements which provide that, if a dispute should arise, it will be resolved by arbitration. These will generally be normal contracts, but they contain an arbitration clause
• agreements which are signed after a dispute has arisen, agreeing that the dispute should be resolved by arbitration (sometimes called a "submission agreement")

The former is the far more prevalent type of arbitration agreement. Sometimes, legal significance attaches to the type of arbitration agreement. For example, in certain Commonwealth countries, it is possible to provide that each party should bear their own costs in a conventional arbitration clause, but not in a submission agreement.

In keeping with the informality of the arbitration process, the law is generally keen to uphold the validity of arbitration clauses even when they lack the normal formal language associated with legal contracts. Clauses which have been upheld include:

• "arbitration in London - English law to apply"^[13]
• "suitable arbitration clause"^[14]
• "arbitration, if any, by ICC Rules in London"^[15]

The courts have also upheld clauses which specify resolution of disputes other than in accordance with a specific legal system. These include provision indicating:

• that the arbitrators "must not necessarily judge according to the strict law but as a general rule ought chiefly to consider the principles of practical business"^[16]
• "internationally accepted principles of law governing contractual relations"^[17]

Agreements to refer disputes to arbitration generally have a special status in the eyes of the law. For example, in disputes on a contract, a common defence is to plead the contract is void and thus any claim based upon it fails. It follows that if a party successfully claims that a contract is void, then each clause contained within the contract, including the arbitration clause, would be void. However, in most countries, the courts have accepted that:

1. a contract can only be declared void by a court or other tribunal; and
2. if the contract (valid or otherwise) contains an arbitration clause, then the proper forum to determine whether the contract is void or not, is the arbitration tribunal.^[18]

Arguably, either position is potentially unfair; if a person is made to sign a contract under duress, and the contract contains an arbitration clause highly favourable to the other party, the dispute may still referred to that arbitration tribunal.^{[citation needed]} Conversely a court may be persuaded that the arbitration agreement itself is void having been signed under duress. However, most courts will be reluctant to interfere with the general rule which does allow for commercial expediency; any other solution (where one first had to go to court to decide whether one had to go to arbitration) would be self defeating.

Sources of law

States regulate arbitration through a variety of laws. The main body of law applicable to arbitration is normally contained either in the national Private International Law Act (as is the case in Switzerland) or in a separate law on arbitration (as is the case in England). In addition to this, a number of national procedural laws may also contain provisions relating to arbitration.

By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are:

• The Geneva Protocol of 1923
• The Geneva Convention of 1927
• The European Convention of 1961
• The Washington Convention of 1965 (governing settlement of international investment disputes)
• The UNCITRAL Model Law (providing a model for a national law of arbitration)
• The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration)

Arbitral tribunal

Main article: Arbitral tribunal

The term arbitral tribunal is used to denote the arbitrator or arbitrators sitting to determine the dispute. The composition of the arbitral tribunal can vary enormously, with either a sole arbitrator sitting, two or more arbitrators, with or without a chairman or umpire, and various other combinations.

In most jurisdictions, an arbitrator enjoys immunity from liability for anything done or omitted whilst acting as arbitrator unless the arbitrator acts in bad faith.

Arbitrations are usually divided into two types:

• ad hoc arbitrations and administered arbitrations.

In ad hoc arbitrations, the arbitral tribunals are appointed by the parties or by an appointing authority chosen by the parties. After the tribunal has been formed, the appointing authority will normally have no other role and the arbitation will be managed by the tribunal.

In administered arbitration, the arbitration will be administered by a professional arbitration institution providing arbitration services, such as the LCIA in London, or the ICC in Paris, or the American Arbitration Association in the United States. Normally the arbitration institution also will be the appointing authority.

Arbitration institutions tend to have their own rules and procedures, and may be more formal. They also tend to be more expensive, and, for procedural reasons, slower.^[19]

Duties of the tribunal

The duties of a tribunal will be determined by a combination of the provisions of the arbitration agreement and by the procedural laws which apply in the seat of the arbitration. The extent to which the laws of the seat of the arbitration permit "party autonomy" (the ability of the parties to set out their own procedures and regulations) determines the interplay between the two.

However, in almost all countries the tribunal owes several non-derogable duties. These will normally be:

• to act fairly and impartially between the parties, and to allow each party a reasonable opportunity to put their case and to deal with the case of their opponent (sometimes shortened to: complying with the rules of "natural justice"); and
• to adopt procedures suitable to the circumstances of the particular case, so as to provide a fair means for resolution of the dispute.^[20]

Arbitral awards

Main article: Arbitration award

Although arbitration awards are characteristically an award of damages against a party, in many jurisdictions tribunals have a range of remedies that can form a part of the award. These may include:

1. payment of a sum of money (conventional damages)
2. the making of a "declaration" as to any matter to be determined in the proceedings
3. in some^[who?] jurisdictions, the tribunal may have the same power as a court to:
   1. order a party to do or refrain from doing something ("injunctive relief")
   2. to order specific performance of a contract
   3. to order the rectification, setting aside or cancellation of a deed or other document.
4. In other jurisdictions, however, unless the parties have expressly granted the arbitrators the right to decide such matters, the tribunal's powers may be limited to deciding whether a party is entitled to damages. It may not have the legal authority to order injunctive relief, issue a declaration, or rectify a contract, such powers being reserved to the exclusive jurisdiction of the courts.

Enforcement of arbitration awards

One of the reasons that arbitration is so popular in international trade as a means of dispute resolution, is that it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

Under the New York Convention 1958, an award issued a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defenses.

Only foreign arbitration awards can be subject to recognition and enforcement pursuant to the New York Convention. An arbitral decision is foreign where the award was made in a state other than the state of recognition or where foreign procedural law was used.^[21]

Virtually every significant commercial country in the world is a party to the Convention, but relatively few countries have a comprehensive network for cross-border enforcement of judgments of the court.

The other characteristic of cross-border enforcement of arbitration awards that makes them appealing to commercial parties is that they are not limited to awards of damages. Whereas in most countries only monetary judgments are enforceable in the cross-border context, no such restrictions are imposed on arbitration awards and so it is theoretically possible (although unusual in practice) to obtain an injunction or an order for specific performance in an arbitration proceeding which could then be enforced in another New York Convention contracting state.

The New York Convention is not actually the only treaty dealing with cross-border enforcement of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral Awards 1927 [3] remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilized in practice.

Article V of the New York Convention provides an exhaustive list of grounds on which enforcement can be challenged. These are generally narrowly construed by the courts in arbitration centres to uphold the pro-enforcement bias of the Convention.

Arbitration with sovereign governments

Certain international conventions exist in relation to the enforcement of awards against states.

• The Washington Convention 1965 relates to settlement of investment disputes between states and citizens of other countries. The Convention created the International Centre for Settlement of Investment Disputes (or ICSID). Compared to other arbitration institutions, relatively few awards have been rendered under ICSID.^[22]
• The Algiers Declaration of 1981 established the Iran-US Claims Tribunal to adjudicate claims of American corporations and individuals in relation to expropriated property during the Islamic revolution in Iran in 1979. The tribunal has not been a notable success, and has even been held by an English court to be void under its own governing law.^[23]

Challenge

Generally speaking, by their nature, arbitration proceedings tend not to be subject to appeal, in the ordinary sense of the word.

However, in most countries, the court maintains a supervisory role to set aside awards in extreme cases, such as fraud or in the case of some serious legal irregularity on the part of the tribunal.

Only domestic arbitral awards^{[citation needed]} (i.e. those where the seat of arbitration is located in the same state as the court seised) are subject to set aside procedure.

In American arbitration law there exists a small but significant body of case law which deals with the power of the courts to intervene where the decision of an arbitrator is in fundamental disaccord with the applicable principles of law or the contract.^[24] However, this body of case law has been called into question by recent decisions of the Supreme Court.^[25]

Unfortunately there is little agreement amongst the different American judgments and textbooks as to whether such a separate doctrine exists at all, or the circumstances in which it would apply. There does not appear to be any recorded judicial decision in which it has been applied. However, conceptually, to the extent it exists, the doctrine would be an important derogation from the general principle that awards are not subject to review by the courts.

Costs

In many legal systems - both common law and civil law - it is normal practice for the courts to award legal costs against a losing party, with the winner becoming entitled to recover an approximation of what it spent in pursuing its claim (or in defense of a claim). The United States is a notable exception to this rule, as except for certain extreme cases, a prevailing party in a US legal proceeding does not become entitled to recoup its legal fees from the losing party.^[26]

Like the courts, arbitral tribunals generally have the same power to award costs in relation to the determination of the dispute. In international arbitration as well as domestic arbitrations governed by the laws of countries in which courts may award costs against a losing party, the arbitral tribunal will also determine the portion of the arbitrators' fees that the losing party is required to bear.

Nomenclature

As methods of dispute resolution, arbitration procedure can be varied to suit the needs of the parties. Certain specific "types" of arbitration procedure have developed, particularly in North America.

• Judicial Arbitration is, usually, not arbitration at all, but merely a court process which refers to itself as arbitration, such as small claims arbitration before the County Courts in the United Kingdom.^[3]

• High-Low Arbitration, or Bracketed Arbitration, is an arbitration wherein the parties to the dispute agree in advance the limits within which the arbitral tribunal must render its award. It is only generally useful where liability is not in dispute, and the only issue between the party is the amount of compensation. If the award is lower than the agreed minimum, then the defendant only need pay the lower limit; if the award is higher than the agreed maximum, the claimant will receive the upper limit. If the award falls within the agreed range, then the parties are bound by the actual award amount. Practice varies as to whether the figures may or may not be revealed to the tribunal, or whether the tribunal is even advised of the parties' agreement.

• Binding Arbitration is a form of arbitration where the decision by the arbitrator is legally binding and enforceable, similar to a court order.

• Non-Binding Arbitration is a process which is conducted as if it were a conventional arbitration, except that the award issued by the tribunal is not binding on the parties, and they retain their rights to bring a claim before the courts or other arbitration tribunal; the award is in the form of an independent assessment of the merits of the case, designated to facilitate an out-of-court settlement. State law may automatically make a non-binding arbitration binding, if, for example, the non-binding arbitration is court-ordered, and no party requests a trial de novo (as if the arbitration had not been held).^[27]

• Pendulum Arbitration refers to a determination in industrial disputes where an arbitrator has to resolve a claim between a trade union and management by making a determination of which of the two sides has the more reasonable position. The arbitrator must choose only between the two options, and cannot split the difference or select an alternative position. It was initiated in Chile in 1979.

• This form of arbitration is also known as Baseball Arbitration. It takes its name from a practice which arose in relation to salary arbitration in Major League Baseball.

• Night Baseball Arbitration is a variation of baseball arbitration where the figures are not revealed to the arbitration tribunal. The arbitrator will determinate the quantum of the claim in the usual way, and the parties agree to accept and be bound by the figure which is closest to the tribunal's award.

Such forms of "Last Offer Arbitration" can also be combined with mediation to create MEDALOA hybrid processes (Mediation followed by Last Offer Arbitration). ^[28]

See also

Alternative dispute resolution American Arbitration Association Arbitral tribunal Arbitration award Arbitration in the United States of America Conflict resolution research Dispute resolution organization Expert determination International arbitration Mandatory arbitration

National Academy of Arbitrators National Arbitration Forum National Institute of Arbitration [4] (A Constituent Unit of The Global Open University Nagaland) Society of Construction Arbitrators UNCITRAL Model Law on International Commercial Arbitration Arbitration Roundtable of Toronto

Notes

1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). [http://www.pearsonschool.com/index.cfm? locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4 Economics: Principles in action]. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 324. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm? locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4. 
2. ^ Information World Mediation WikiMediation
3. ^ ^{a b} In the United Kingdom, small claims in the County court are dealt with by a procedure called "small claims arbitration", although the proceedings are held in front of a district judge, paid for by the state. In Russia, the courts dealing with commercial disputes is referred to as the Supreme Court of Arbitration of the Russian Federation, although it is not an arbitral tribunal in the true sense of the word.
4. ^ Although all attempts to determine disputes outside of the courts are "alternative dispute resolution" in the literal sense, ADR in the technical legal sense, is the process whereby an attempt is made to reach a common middle ground through an independent mediator as a basis for a binding settlement. In direct contrast, arbitration is an adversarial process to determine a winner and a loser in relation to the rights and wrongs of a dispute.
5. ^ [1]
6. ^ [2]
7. ^ Trans-Lex.org: Confidentiality
8. ^ Cf. e.g. Section 1030 subsection 1 of the German Zivilprozessordnung.
9. ^ Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985)
10. ^ Section 1030 subsection 2 Zivilprozessordnung
11. ^ To be correct: certain form, as defined by statute, of an electronic signature using a chip card and a PIN code is also sufficient
12. ^ Section 1031 subesction 5 of the Zivilprozessordnung. The restriction does not apply to notarized agreements, as it is presumed that the notary public will have well informed the consumer about the content and its implications.
13. ^ Swiss Bank Corporation v Novrissiysk Shipping [1995] 1 Lloyd's Rep 202
14. ^ Hobbs Padgett & Co v J C Kirkland (1969) 113 SJ 832
15. ^ Mangistaumunaigaz Oil Production v United Kingdom World Trade [1995] 1 Lloyd's Rep 617
16. ^ Norske Atlas Insurance Co v London General Insurance Co (1927) 28 Lloyds List Rep 104
17. ^ Deutsche Schachtbau v R'As al-Khaimah National Oil Co [1990] 1 AC 295
18. ^ For example, under English law see Heyman v Darwins Ltd. [1942] AC 356
19. ^ For example, all arbitral awards issued by the ICC have to be reviewed internally before being handed down, which helps certainty and improves the quality of awards, but leads to delay and expense.
20. ^ For example, in England these are codified in section 33 of the Arbitration Act 1996
21. ^ Article 1 of the 1958 New York Convention
22. ^ Tupman, "Case Studies in the Jurisdiction of the International Centre for Settlement of Investment Disputes" (1986) 35 ICLQ 813
23. ^ Dallal v Bank Mellat [1986] 1 QB 441
24. ^ The expression appears in the majority judgment in the U.S. Supreme Court decision in Wilko v Swan 346 US 427 (1953)
25. ^ "Guide to Arbitration in New York". CMS Legal. http://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_NEW%20YORK.pdf. Retrieved 8 May 2012. 
26. ^ "Arbitration in New York". CMS Legal. http://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_NEW%20YORK.pdf. Retrieved 10 May 2012. 
27. ^ E.g., Section 44.103, Florida Statutes.
28. ^ http://www.altenburger.ch/uploads/tx_altenburger/jl_2007_The_Interaction_Between_Arbitration_and_Mediation.pdf.

References

• Boskey, James B. (1993) The American Arbitration Association Insurance ADR Manual West Pub. Co.

International Arbitration

• Blackaby, Nigel; Lindsey, David; Spinillo, Alessandro (2003) International Arbitration in Latin America Kluwer
• Born, Gary (2009) International Commercial Arbitration Kluwer
• Buhring-Uhle, Christian and Kirchhof, Gabriele Lars (2006) Arbitration and Mediation in International Business 2nd Ed.
• Craig, W. Laurence; Park, William W.; Paulsson, Jan (2001) International Chamber of Commerce Arbitration Oxford University Press
• David, R. (1985) Arbitration in International Trade
• Dugan, Christopher; Wallace, Jr., Don; Rubins, Noah (2005) Investor-State Arbitration Oxford University Press
• Lew, Julian; Mistelis, Loukas; Kroell, Stefan (2003) Comparative International Commercial Arbitration
• The Permanent Court of Arbitration (2000) International Alternative Dispute Resolution: Past, Present and Future
• PWC (2008) International Arbitration: Corporate Attitudes and Practices
• Redfern, A. and Hunter, M. (2004) Law and Practice of International Commercial Arbitration 4th Ed.
• Schreuer, Christoph H. (2001) The ICSID Convention: A Commentary Cambridge University Press – (International Centre for Settlement of Investment Disputes)
• Tibor Varady, John J. Barcelo, and Arthur Taylor Von Mehren (2006) International Commercial Arbitration 3rd Ed.
• Yves Dezalay and Bryant G. Garth. (1998) Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order

External links

Look up arbitration in Wiktionary, the free dictionary.

• / United States Arbitration Association.
• The Association for International Arbitration.
• International Institute for Conflict Prevention & Resolution (CPR).
• Opensource Arbitration System project
• Dispute Resolution and Arbitration at the Open Directory Project.
• School of International Arbitration.
• To read actual labor arbitration awards and find arbitrator's resumes at Grand Valley State University.
• The arbitration database.
• American Arbitration Association.
• China Arbitraiton Online & Arbitration database.
• Scottish Arbitration Centre
• Dispute Resolution Hamburg - Rechtsstandort Hamburg e.V.

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

Dansk (Danish)
n. - voldgift, voldgiftsafgørelse

idioms:

• arbitration board    voldgiftsinstans

Nederlands (Dutch)
arbitrage (bij geschil)

Français (French)
n. - arbitrage, concordat

idioms:

• arbitration board    instance chargée d'arbitrer les conflits sociaux

Deutsch (German)
n. - Vermittlung, Schlichtung

idioms:

• arbitration board    Schiedsgericht

Ελληνική (Greek)
n. - (νομ.) διαιτησία

idioms:

• arbitration board    επιτροπή διαιτησίας

Italiano (Italian)
arbitrato, compromesso, arbitraggio

idioms:

• arbitration board    tribunale arbitrale
• court of arbitration    tribunale arbitrale

Português (Portuguese)
n. - julgamento (m) de árbitros, arbitragem (f)

idioms:

• arbitration board    corpo (m) de arbitragem
• court of arbitration    corte (f) de arbitragem

Русский (Russian)
разбор спора третейским судьей, соглашение о передаче спора на решение третьей стороне, арбитраж

idioms:

• arbitration board    арбитражный совет
• court of arbitration    третейский суд

Español (Spanish)
n. - arreglo, avenencia, arbitraje

idioms:

• arbitration board    junta arbitral

Svenska (Swedish)
n. - skiljedom

中文（简体）(Chinese (Simplified))
公断, 仲裁

idioms:

• arbitration board    仲裁委员会

中文（繁體）(Chinese (Traditional))
n. - 公斷, 仲裁

idioms:

• arbitration board    仲裁委員會

한국어 (Korean)
n. - 중재[재판]

日本語 (Japanese)
n. - 仲裁, 仲裁裁判

idioms:

• arbitration board    仲裁委員会

العربيه (Arabic)
‏(الاسم) التحكيم‏

עברית (Hebrew)
n. - ‮בוררות, תיווך‬

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