What is Arbitration?

Arbitration is an alternative to civil litigation in the traditional court setting. Interestingly enough if you read the fine print on almost any contract you sign - from construction to new bank accounts, investments, large purchase agreements, airline flights, employment contracts etc. - you will notice that they all contain arbitration clauses. What these clauses generally say is that should you and the other party in the contract have a dispute about the terms of the contract - contract specifications not being met, timeline discrepancies, refund policies, dismissal guidelines etc. - then you are required to seek mediation and/or arbitration as a means to resolve the conflict. What does that mean?

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It means that you cannot just hire an attorney and go to court to sue the other party. Basically you are giving pre-approval to resolve the dispute out of court. Arbitrators act like judges in that they hear both sides of a dispute and then make an award. An award, like a court judgement is legally binding. Parties are obliged to do or pay what the arbitrator determines. There is only a small window to appeal an arbitrator decision to a court of law, and it generally involves issues of procedure rather than merits of the case. Courts are reluctant to overturn arbitrator decisions. 

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Why do people and organizations choose arbitration? There are many advantages of arbitration to court. Generally, arbitration proceedings are cheaper, they occur much faster than court, they are private, and parties have joint control over who presides over the hearing. That is, both parties must agree to both arbitrate in the first place (usually satisfied by the aforementioned agreement) and then who the arbitrator(s) will be. 

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In scope, arbitrators may hear cases ranging from neighbour disputes about fences or land claims to larger international contract disputes between nations. 

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If you are a more visual learner here is a short video on the subject.