What is arbitration?
Arbitration is the agreement between disputing parties to allow and unbiased third party to decide what resolution would serve all parties most fairly.
What this means is that 2 or more people involved in a dispute will allow a neutral party to decide the outcome of that dispute. THE ARBITRATOR’S DECISION IS FINAL.
Many contracts (especially real estate) have arbitration clauses which force people to arbitrate in the event of a dispute. This is an extremely effective tool in holding down the extraordinary costs of litigation.
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Why is the arbitrator’s decision final?
The definition of arbitration is that parties have “agreed to allow the arbitrator to settle the dispute” in a way he/she feels is most fair and beneficial to all parties. The arbitrator’s decision is final because that is what the disputing parties have agreed to.
There are times when people unhappy with the arbitrator’s decision will attempt to contest that decision in a court of law. Courts usually frown upon this course of action due to the fact that judges feel a conscious decision was made by disputing parties to allow someone to settle the matter and now, just because one of those parties may not like the result, they decide that they are no longer willing to play by the rules that they themselves set up. Generally in this situation a court will not only hold the arbitrator’s decision but will charge the party who dragged the agreed settlement into court the OTHER PARTY’S expenses (including court costs, their attorney’s fees, etc.)
IT IS EXTREMELY DIFFICULT TO OVERTURN AN ARBITRATION
In some rare cases where it can be shown that one party perpetrated fraud to have an arbitrator reach his/her resolution, there have been times where a judge will order a 2nd arbitration which will over-ride the first.
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I went to small claims court once and arbitration sounds kind of like that.
This is a correct statement. In small claims court, the judge asks for the evidence, reviews it, and usually seems to try to come to an equitable decision. (Equitable meaning something that takes care of both party’s needs - - unless of course one party is just clearly in the wrong.) Also, “equity” is not always what would be considered legal. Small claims court judges might allow and hear evidence which would have been disallowed in a trial with a jury.
This being said, picture going to court, presenting your evidence in 5 or 10 minutes, now the other party getting the same chance to give testimony and/or evidence, then having that evidence reviewed by the judge, then having him or her make a decision which is then stamped “final.” This is basically arbitration. Only when you are engaging with an arbitrator, he does not have 35 cases lined up after yours that have to be heard in that same 8 hour day. Obviously, you would have more than 5 or 10 minutes to present your case.
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Who picks the arbitrator?
There are 2 parts to the answer to this question. Has one party commenced a lawsuit or not.
No Lawsuit Has Been Filed
If there is no lawsuit and no lawyers are involved, the parties can quickly agree to any arbitrator of their choice. It is important to understand that NEUTRALITY IS THE KEY.
An arbitrator who is a friend or potentially even an acquaintance of either party in a dispute should bow out and not decide the dispute.
HOWEVER, just because one party found an arbitrator and spoke to him or her first, would not mean that arbitrator was now biased towards the first party of contact.
A Lawsuit Has Been Filed
Once a lawsuit has been filed, attorneys are part of the process. The lawyers may have people they are used to using; they may have friends that they want to support, etc.
IT IS IMPORTANT TO KNOW the decision on choosing an arbitrator is the client’s final choice. However, clients will usually defer this decision to their attorneys.
Usually lawyers want other lawyers or retired judges to decide cases. We are neither.
We specialize in resolving disputes quickly, efficiently, and fairly, but we are not lawyers and do not engage in the money and time wasting part of the process that other members of the legal profession seem to.
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What is the difference between arbitration and mediation?
Arbitration is the agreement between disputing parties to allow an unbiased third party to decide what resolution would serve all parties most fairly.
Mediation is intercession by an unbiased party whose sole purpose is to assist disputing parties in reaching some type of mutually satisfactory agreement.
Arbitration - the person decides what is best. That’s it. The decision is FINAL.
Mediation - the person attempts to get parties to reach middle ground. Resolution is not guaranteed, whereas in arbitration the matter will be resolved - one way or another.
Many divorces are mediated not arbitrated. see ConflictPro.com
Also, during a civil dispute, courts will require a minimum of one attempt at mediation. This event usually is early on in the process, costs each party a minimum of about 5000$ per day and usually results in no settlement.
It is the 2nd or 3rd attempts at mediation where cases are usually settled -- but even at this juncture, 10s of thousands of dollars have been spent by both sides.
Very few cases ever make it to trial.
But if all else fails, the judge or jury become the “arbitrators” when the disputing parties finally bring their case to court.
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How long does arbitration take?
Generally all cases are settled in less than 10 hours (1 billable day). Many are settled in about 5 or 6 hours (about 1/2 billable day). Also, it is not unusual for disputing parties to miss only 3 or 4 hours of work, because the arbitrator will usually use the balance of time to come to a fair decision without requiring the parties to be present during this part of the process.
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Why would parties arbitrate as opposed to mediate or going to court?
1) Parties will most often arbitrate because it is required in a contract they have signed.
2) The second most frequent form of arbitration is where parties are so sick of litigation, so sick of each other, and so sick of wasting money, that both parties kind of throw their arms in the air and say, “Let’s just let somebody make a decision and we move on with life.”
3) Parties will mediate when they have issues but are still talking. Both parties agree that wasting time and money is not in their best interest, but don’t really want to leave the decision solely in one person’s hands, so they decide to mediate. All they are really doing here is attempting to have a buffer in their disputes. Oftentimes the parties only disagree on a few issues, but those issues are emotionally charged and make it difficult to communicate, so a mediator steps in, tries to maintain calm, and attempts settlement through mutual negotiation. Most divorces are mediated. See Conflictpro.com
4) Going to court is ALWAYS the last option. The journey from filing of a lawsuit to actually testifying in front of a jury is extremely laborious, costly, time consuming, and mentally and emotionally draining. Parties arbitrate or mediate because they do not want their lives revolving around a lawsuit for 3, 4 or 5 years. Going to court usually happens when one of the disputing parties has lost all ability to reason or is so in the wrong that no other options are available.
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