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Arbitration Lesson #1 - What is it?
July 08, 2006 by Ross Runkel at LawMemo

This is the first in a series of lessons on the law of arbitration.

Arbitration is not mediation. Don't mix them up.

• An arbitrator is like a private judge who listens to both sides and then makes a decision that is final and binding.
• A mediator is a person who helps disputing parties work out their own solution to a dispute, and has no power to compel them to agree to anything.

When two parties have a dispute, they can get that dispute resolved by an arbitrator rather than going to court. There are many ways to conduct an arbitration. The following example is fairly typical.

• Contract. The parties sign a contract to arbitrate. The arbitration agreement can be entered into either before or after a dispute arises. Almost all collective bargaining agreements have arbitration clauses. Many non-union employers require their employees to arbitrate disputes, by entering into an arbitration agreement before any disagreement or dispute exists.
• Selecting an arbitrator. Usually the parties agree to have some outside agency help them select an arbitrator. Often the agency will send a list of available arbitrators, the parties take turns crossing off names, and the person remaining on the list becomes the arbitrator.
• Setting a hearing. The arbitrator works with the parties to find a good time and place to hold the arbitration.
• The hearing. An arbitration hearing can be somewhat informal (no robes; no courtrooms; no jury). Formal rules of evidence are rarely followed. Yet the hearing proceeds in a way that it similar to a court trial. Each side makes an opening statement describing the situation. Each side calls witnesses and presents documents. Witnesses get cross-examined. At the end, each side makes closing arguments - sometimes orally and sometimes by written briefs.
• The decision. The arbitrator's job is to make a decision based on the evidence presented at the hearing. The decision usually is in writing, and explains how and why the arbitrator reached a particular result.
• Final and binding. Because an arbitrator's decision (called an award) is final and binding, there is no appeal process. Courts have extremely limited power to overturn an arbitration award, and it rarely happens.
• Enforcing the award. Usually the losing party will comply with what the arbitrator says. If not, then the winning party can file a suit and get a court to enforce the award.

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