What is Arbitration, Anyway?

Jun 2021

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.


Indeed, arbitration processes have become a critical part of the landscape of dispute resolution. Today, whether you know it or not, you are very likely bound by an agreement to arbitrate disputes in lieu of going to court. Arbitration may come into play not just in business relationships but also in your place of work, your investments, and even the apps on your cell phones.


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 joined the University of Missouri School of Law and the Center for Dispute Resolution as the Elwood L. Thomas Missouri Endowed Professor of Law in 2016. Previously she was a Professor at the University of Colorado School of Law for over 16 years. Prior to teaching, Professor…

Featured Arbitrators

Results from: Virginia, United States
ad
View all
ad

Read these next

Category

Separating the People from the Problem – Colin Rule and the Rise of Online Dispute Resolution

When the Apple II was released in 1977, it was among the first computers marketed and mass-produced for businesses and individuals alike. Apple would later adopt the slogan “The computer...

By Colin Rule
Category

Arbitration Conversation No. 59: Mediator, Arbitrator, and Special Master Karl Bayer

In this episode of the Arbitration Conversation Amy interviews Karl Bayer, an Alternative Dispute Resolution practitioner with almost thirty years of experience in litigation, mediation, and arbitration. A long-time successful...

By Karl Bayer, Amy Schmitz
Category

Canada – Enforcing Award’s Remedy Excludes Substituting Court’s Own Remedy

This article first appeared on Urbas Arbitral, here. In Abittan v. Wilcox, 2020 ONSC 6836, Mr. Justice Frederick L. Myers reiterated the “consequences” of agreeing to submit disputes to arbitration, limiting...

By Daniel Urbas

Find an Arbitrator