What is Arbitration, Anyway?

Many years ago, I conducted focus groups in Denver, Colorado, asking consumers to discuss their understanding of arbitration. Nearly all the consumers assumed that arbitration is the same as mediation. Moreover, they did not realize that arbitration is binding or that being subject to an arbitration agreement generally cuts off one’s access to a class action. Accordingly, here is a short post to briefly describe arbitration.

Knowledgeable attorneys understand the term “arbitration” to refer to any process in which a private third-party neutral, renders a judgment, or “award,” regarding a dispute after hearing evidence and arguments, much like a judge. “Arbitration” comprehends a wide variety of procedures, similar in varying degrees to litigation and usually intended as a partial or complete substitute for court trial. The two essential characteristics of most arbitration procedures are, firstly, they are adversary adjudicative procedures analogous to court trial, and secondly, they result in a judgment (award) that is binding.

When lawyers are involved in arbitration, they act as advocates for parties in much the same way they do in a court trial. They make oral arguments at hearings, present documentary and testimonial evidence, and prepare briefs for the arbitrators, who act as neutral decision makers. A single arbitrator, or panel of three arbitrators in larger cases, will render an award. Arbitration awards are generally more difficult to overturn than court judgments.

Although arbitration procedures and practice vary in detail and may differ significantly from court trial, arbitration processes are of a fundamentally different character from negotiation, mediation, and other processes that are more facilitative. For example, mediation is similar to arbitration to the extent that it involves a neutral third party. However, that third party merely helps facilitate the disputing parties’ negotiations to assist them in reaching a voluntary settlement. A mediator does not render a final award. Again, an arbitrator, in contrast, does render a final award in most circumstances. Nonetheless, there is a form of arbitration called “Advisory Arbitration,” which is slightly different from the final arbitration noted above. This refers to a kind of process used in some federal and state court programs where an arbitration panel renders a nonbinding advisory award prior to trial of a case. The advisory award is not enforceable in court, but it may stimulate voluntary settlement of a dispute before trial.

In the United States, lawyers are most often involved with final and binding arbitration pursuant to a private agreement between two or more parties. The agreement usually provides that the arbitration award will be mutually binding and enforceable in a court of law. An extensive body of rules, practices, case decisions, and ethical standards has grown up around forms of contract-based, binding arbitration. You will find many articles and other resources related to arbitration on this site – Arbitrate.com. We hope you find it helpful!

author

Amy Schmitz

Professor Amy Schmitz is the John Deaver Drinko-Baker & Hostetler Chair in Law at the Ohio State University Moritz College of Law. From 2016-2021 Professor Schmitz was the Elwood L. Thomas Missouri Endowed Professor of Law at the University of Missouri School of Law and the Center for Dispute Resolution.…

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