The process by which the parties to a dispute submit their differences to the judgment of an impartial person or group appointed by mutual consent or statutory provision.
Dictionary:
ar·bi·tra·tion (är'bĭ-trā'shən) ![]() |
The process by which the parties to a dispute submit their differences to the judgment of an impartial person or group appointed by mutual consent or statutory provision.
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| Computer Desktop Encyclopedia: arbitration |
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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| Investment Dictionary: Arbitration |
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.
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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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| Banking Dictionary: Arbitration |
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.
| Real Estate Dictionary: Arbitration |
Process of settling disputes through a neutral third party agreed upon by each side in the dispute. In most cases, arbitration is decided by private firms established to provide this service and is an alternative to filing suit in the public courts.
Example: Many real estate sales contracts contain a provision that requires all disputes to be submitted to arbitration. Such a provision means the parties waive their right to sue for satisfaction in the public judicial system.
| Britannica Concise Encyclopedia: arbitration |
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| Architecture: arbitration |
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.
| US History Encyclopedia: Arbitration |
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
| Columbia Encyclopedia: industrial arbitration |
Bibliography
See F. Elkouri, How Arbitration Works (1985); M. Bognanno, Labor Arbitration in America (1992).
Bibliography
See J. H. Ralston, International Arbitration from Athens to Locarno (1929); C. M. Bishop, International Arbitral Procedure (1930); K. S. Carlston, The Process of International Arbitration (1946); H. W. Briggs, The Law of Nations (2d ed. 1952); J. L. Brierly, The Law of Nations (6th ed. 1963); A. Cox, Prospects for Peacekeeping (1967); R. Fisher, Improving Compliance with International Law (1981).
| Law Encyclopedia: Arbitration |
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.
| Politics: arbitration |
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.
| Word Tutor: arbitration |
The dispute was handled in a quick arbitration.
| Wikipedia: Arbitration |
Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, wherein 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 settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides.[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. It is more helpful, however, simply to classify arbitration as a form of binding dispute resolution, equivalent to litigation in the courts, and entirely distinct from the other forms of dispute resolution, such as negotiation, mediation, or determinations by experts, which are usually non-binding. Arbitration is most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is far more controversial in consumer and employment matters, where arbitration is not voluntary but is instead imposed on consumers or employees through fine-print contracts, denying individuals of their right to access the courts.
Arbitration can be either voluntary or mandatory and can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. 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.
Contents |
It is not known exactly when formal non-judicial arbitration first began but it can be said with some certainty that arbitration, as a way of resolving disputes predates formal courts. Records from ancient Egypt attest to its use especially with high priests and their interaction with the public. Arbitration was popular both in ancient Greece and in Rome.[3]
Under English law, the first law on arbitration was the Arbitration Act 1697,[4] but when it was passed arbitration was already common. The first recorded judicial decision relating to arbitration was in England in 1610.[5] The noted Elizabethan English legal scholar Sir Edward Coke refers to an earlier decision dating from the reign of Edward IV (which ended in 1483). Early arbitrations at common law suffered from the fatal weakness that either party to the dispute could withdraw the arbitrator's mandate right up until the delivery of the award if things appeared to be going against them (this was rectified in the 1697 Act).
The Jay Treaty of 1794 between Britain and the United States sent unresolved issues regarding debts and boundaries to arbitration, which took 7 years and proved successful.
In the first part of the twentieth century, many countries (France and the United States being good examples) began to pass laws sanctioning and even promoting the use of private adjudication as an alternative to what was perceived to be inefficient court systems.
The growth of international trade however, brought greater sophistication to a process that had previously been largely ad hoc in relation to disputes between merchants resolved under the auspices of the lex mercatoria. As trade grew, so did the practice of arbitration, eventually leading to the creation of a variant now known as international arbitration, as a means for resolving disputes under international commercial contracts.
Today, arbitration also occurs online, in what is commonly referred to as Online Dispute Resolution, or ODR. Typically, ODR proceedings occur following the filing of a claim online, with the proceedings taking place over the internet, and judgment rendered on the basis of documentation presented.
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed will be final and binding. Arbitration is not the same as:
Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:
However, some of the disadvantages of arbitration can be that:
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:
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:
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:
The courts have also upheld clauses which specify resolution of disputes other than in accordance with a specific legal system. These include provision indicating:
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:
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. 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.
Arbitration is subject to different laws. These may be summarized as follows:
The arbitration agreement which is part of the main contract (often referred to as "container contract") is governed by the law which governs the main contract. An important feature of arbitration, however, is severability - the fact that arbitration agreement lives a life of its own and is autonomous of the main agreement. Invoking the invalidity of the main agreement may not necessarily bring with it the invalidity of the arbitration clause. Another feature closely tied to this is "competence-competence" - the ability of the arbitration tribunal to decide on its own jurisdiction. Therefore a party who is trying to avoid arbitration at an early stage by claiming that the main contract is invalid will face the arbitration agreement separate from the main one and the arbitrators deciding on their own competence.
In American law, this was recognized by the Prima Paint Corp. v. Flood & Conklin Mfg. Co. decision of the U.S. Supreme Court.
Most legal systems recognise the concept of a "seat" of the arbitration, which is a geographical and legal jurisdiction to which the arbitration is tied. The seat will normally determine the procedural rules (lex arbitri) which the arbitration follows, and the courts which exercise jurisdiction over the seat will have a supervisory role over the conduct of the arbitration.
Parties to the arbitration are free to choose the seat of arbitration and often do so in practice. If they do not, the arbitral tribunal will do it for them. Whereas it is possible to detach procedural law from the seat of arbitration (e.g. seat in Switzerland, English procedural law) this creates confusion as it subjects the arbitration to two controlling and possibly conflicting laws. The procedural law of arbitration, normally determined by the seat, ought to be distinguished from the procedure that the arbitration panel will follow. The latter refers to daily operation of the arbitration and is normally determined either by the institution in question (if arbitration is institutional, e.g. ICC Rules) or by reference to a ready-made procedure (such as the UNCITRAL Rules).
The seat of arbitration might not be the same as the place where proceedings are actually happening. Thus, for instance, an ICC arbitration may have its seat in London (and therefore be governed by the English lex arbitri and ICC procedural rules) and most sessions may take place outside the UK.
The essential matters of procedure -- such as any disagreement over the appointment or replacement of arbitrators, the jurisdiction of the tribunal itself, or the validity of an arbitration award -- are determined by the procedural law of the seat of the arbitration, and may be decided by recourse to courts. The parties normally influence this through their choice of the seat of arbitration or directly through choice of procedural law.
All other matters of procedure are generally determined by the arbitral tribunal itself (depending on national law and respect for due process) and the preferences of the arbitrators, the parties, and their counsel. The arbitrators' power to determine procedural matters normally includes:
Parties in a commercial dispute will often choose the law applicable to the substance of their dispute. In fact, they are more likely to choose substantive than procedural law as this will have direct impact on the outcome of their dispute. This choice is usually expressed in the arbitration clause itself or at least in part of the contract where the clause is located.
If the parties do not choose the applicable law, the arbitral tribunal will. This is normally interpreted as the ability of the tribunal to choose the choice-of-law rules which will, in turn, point to the applicable law. The arbitrators are not strictly speaking bound by public policy order or mandatory rules of third states but will normally observe them as that increases the chance of the award being recognized.
The tribunal may decide ex aequo et bono only if the parties have expressly authorized them to do so.
The law that applies to issues of recognition will always be the law of the state where this recognition is sought. In a large number of states this will be governed by 1958 New York Convention which harmonizes the recognition and enforcement of foreign arbitral awards.
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 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:
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. 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]
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:
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:
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 defences.
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 [1] remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilised in practise.
Certain international conventions exist in relation to the enforcement of awards against states.
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 (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]
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.
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.
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 conducted in countries where 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.
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.
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| Translations: Arbitration |
Dansk (Danish)
n. - voldgift, voldgiftsafgørelse
idioms:
Nederlands (Dutch)
arbitrage (bij geschil)
Français (French)
n. - arbitrage, concordat
idioms:
Deutsch (German)
n. - Vermittlung, Schlichtung
idioms:
Ελληνική (Greek)
n. - (νομ.) διαιτησία
idioms:
Italiano (Italian)
arbitrato, compromesso, arbitraggio
idioms:
Português (Portuguese)
n. - julgamento (m) de árbitros, arbitragem (f)
idioms:
Русский (Russian)
разбор спора третейским судьей, соглашение о передаче спора на решение третьей стороне, арбитраж
idioms:
Español (Spanish)
n. - arreglo, avenencia, arbitraje
idioms:
Svenska (Swedish)
n. - skiljedom
中文(简体)(Chinese (Simplified))
公断, 仲裁
idioms:
中文(繁體)(Chinese (Traditional))
n. - 公斷, 仲裁
idioms:
idioms:
العربيه (Arabic)
(الاسم) التحكيم
עברית (Hebrew)
n. - בוררות, תיווך
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