Arbitration is becoming increasingly common because so many companies, employers, insurance companies and contractors are adding arbitration clauses to their contracts. Courts are motivated to enforce these clauses in order to reduce a long backlog of cases.
Determining Whether Your Dispute Is Subject to Arbitration
Some contracts may not clearly specify whether disagreements shall be subject to arbitration. If there is a dispute as to whether arbitration is mandated under a contract, generally the courts will get involved to interpret the contractual language. The courts will not rule on the merits of the case, but merely decide whether the contract calls for arbitration.
Disadvantages of Arbitration
Prior to agreeing to arbitration, consumers may want to consider the following disadvantages:
- The arbitrator’s services may be costly. Even though the process is intended to be less costly than the court system, this is not always the case. This is particularly true where the parties retain a panel of arbitrators.
- The arbitrator’s decision is usually final, with no appeals process.
- Arbitrators often lack objectivity. Arbitration services market to major vendors of consumer products, and may owe allegiance to the company that hires them.
What Does the Arbitration Process Look Like?
First, the aggrieved party to the dispute will file a request for arbitration. Usually, parties will have already signed an agreement specifying the agency to be used. The arbitrator (or panel) will also likely be predetermined by the contract. If none is specified, the parties will need to work together to select one.
Next, there will be one or more pre-hearing conferences, where the disputing parties will discuss the process with the arbitrator. Preliminary matters such as confidentiality agreements will be discussed. Next, there may be a period of discovery where the parties gather evidence. This next stage is the hearing. The hearing is often held in a neutral location, such as a conference room. The hearing takes place much like a court proceeding. Each party will make opening statements, and then present witnesses and evidence and be given a chance to cross-examine. Some proceedings permit closing statements and post-hearing briefs.
After the hearing, the arbitrators will render their final decision. They do not have to follow legal precedent when making their decision. These decisions are often a simple declaration of who won and what the damages award is. There is no uniformly accepted deadline for issuing a decision after the hearing.
Arbitration awards cannot be appealed except in extreme situations, such as where it can be shown that the arbitrator was corrupt.
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