How Does Arbitration Work?
Arbitration is an alternative method to settle legal disputes. It is less expensive than litigation in civil courts and a faster procedure. Arbitration differs from mediation, because arbitration is “binding” or final.
Arbitration may be the method identified for dispute resolution in a written agreement such as a lease or a real estate purchase contract. This is compulsory arbitration. Sometimes a civil court may order arbitration. Additionally, parties in any dispute have the option to choose arbitration for conflict resolution, if all parties agree. This is voluntary arbitration.
Civil Litigation versus Arbitration
Besides arbitration being less expensive and faster, it differs significantly from civil litigation in terms of the rights of appeal. The parties to an arbitration proceeding must accept the arbitration results as legal and binding. A civil lawsuit may only be brought after an arbitration award to challenge any of the mistakes in the arbitration procedures themselves, but not to retry the case on its merits.
Arbitration, unlike civil litigation, is a private matter and the records are not public. In an arbitration proceeding, the parties agree on the arbitrator. It is common to choose a retired judge for simple cases. The arbitrator can be a single person or a tribunal. The ability to select the arbitrator can be very helpful if the issues are highly technical. The legal power of discovery is stronger in civil litigation, because the court can order disclosure of things like important documents. In arbitration, these items can be requested but there is no legal way to force someone to give them.
Awards in civil litigation are legally enforceable. An arbitration award is binding; however, in order to enforce an arbitration award this requires a simple legal action in civil court to confirm the arbitration award.
How Does Arbitration Work?
Arbitration follows the rules and procedures of a specific arbitration organization. For those using arbitration clauses in contractual agreements, it is best to identify the arbitration association that has the rules to be followed. It is also important to understand the rules before any potential conflict arises. An example of a popular arbitration association is the American Association of Arbitrators (AAA). Another one is JAMS.
Arbitration procedures begin by the parties paying an arbitration fee to the association that will oversee the arbitration. These fees will include the cost of the arbitration proceedings and the cost of the arbitrators. One party may have to pay the fee if they are bringing the dispute. Usually, the winning party also gets a credit for any arbitration fees paid included in the total arbitration award.
Next, the parties agree to the arbitrators. Once this is done, a period of discovery is allowed for the parties to exchange information. Next, an arbitration hearing is scheduled. During the arbitration hearing, the parties present evidence for the review of the arbitrators.
Once all the evidence is presented, there is a period of deliberation. During this period, the arbitrator reviews the evidence. If there is more than one arbitrator on the tribunal, they discuss and review the evidence together, in order to come to a final conclusion.
One the arbitrator makes a final decision; an arbitration award is made. There is usually a limited period for appeal of the award. After the appeal, the case is either finalized or sent back to be arbitrated again (usually only on specific details of the case). Once the appeal process is finished, a final arbitration award is made.
Summary
Arbitration is very popular in real estate deals because of its significant advantages.