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What is arbitration?

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Arbitration is a form of alternative dispute resolution (ADR). This is a way to resolve disputes outside of judiciary courts. The dispute will be decided by one or more persons (the arbitrators’, arbiters’ or arbitral tribunal), which determine the arbitration award.

An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding. Arbitration can be voluntary or mandatory.

Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. In the United States, arbitration is frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of commercial or employment contracts and may include a waiver of the right to bring a class action claim.

Mandatory consumer and employment arbitration should be distinguished from consensual arbitration, particularly commercial arbitration. Businesses may prefer arbitration rather than a lawsuit due to the lower costs and time commitments for all parties involved.

What Is Arbitration in Law?

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure outside of courts.

The principal characteristics of arbitration are:

  • Consensual by both parties. Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract , the parties insert an arbitration clause in the relevant contract.
  • The parties choose the arbitrator(s). Under the World Intellectual Property Organization (WIPO) Arbitration Rules, the parties can select a sole arbitrator together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator.
  • Arbitration is neutral. In addition to their selection of neutrals of appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage.
  • Arbitration is a confidential procedure. The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any disclosures made during that procedure, and the award. In certain circumstances, the WIPO Rules allow a party to restrict access to trade secrets or other confidential information that is submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.
  • The decision of the arbitral is final and easy to enforce. Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without delay. International awards are enforced by national courts under the New York Convention, which permits them to be set aside only in very limited circumstances.

Here is an article that goes over arbitration rules.

How the Arbitration Process Works

The process of arbitration typically involves the following:

  1. Filing and initiation . One party files a Demand for Arbitration, which is the start of the process.
  2. Arbitrator selection . Both parties work to select an arbitrator, one they can agree on and who can meet their needs based on the nature of their dispute.
  3. Preliminary hearing . Parties meet to discuss substantive case issues, information exchange, witness lists, etc.
  4. Information exchange and preparation . Parties share information and arbitrators handle any related challenges.
  5. Hearings . Parties present evidence and testimonies before the arbitrator.
  6. Post hearing submissions . If necessary, parties submit additional information to the arbitrator.
  7. Award . The arbitrator renders a decision (award) and closes the case.

Because the cost of arbitration is less expensive, many contracts and legal agreements contain provisions to resolve disputes through the arbitration process.

Another way of putting it, the arbitration process works as follows:

  • Pre-arbitration process
  • Decide which issues are covered
  • Determine who is covered
  • Set parameters for discovery
  • Select an arbitrator
  • Arbitration hearing
  • Arbitration decision

Refer to the article here and another article here for more information on the arbitration process.

JAMS has taken an industry-leading role to ensure arbitration remains an attractive alternative to litigation. To save clients time and money, JAMS has instituted new procedural options that allow the crafting of a process that is commensurate with the dispute. With JAMS new Optional Expedited Arbitration Procedures, parties can choose a process that limits depositions, document requests and e-discovery.

When parties utilizing JAMS Comprehensive Arbitration Rules elect to use these procedures, they agree to the voluntary and informal exchange of all non-privileged documents and other information relevant to the dispute.

To read more about JAMS procedures, here is an article .

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Examples of Arbitration

Following are some examples of various types of arbitration.

Patent Arbitrations

  • A patent license dispute
  • Biotech/pharma dispute
  • Medical device relating to a patent arbitration

Trademark Arbitrations

  • Trademark coexistence dispute
  • Technology licensing agreement
  • Software trademark arbitration

Copyright Arbitrations

  • Context of film co-production agreement
  • Determination of licensing terms
  • Broadcast rights distribution arbitration agreement

IT Arbitrations

  • Banking software dispute
  • IT/Telecom dispute
  • Telecom Infrastructure dispute

Other Commercial arbitrations

  • Distribution Agreement
  • Solar Technologies
  • Artist promotion dispute
  • Breach of contract

Here is an article about five arbitration cases that you should know about.

What is Arbitration Used For?

Civil court lawsuits and trails are the traditional method of resolving disputes, such as accident and injury disputes. The rising litigation costs, court congestion and delays, and the negative psychological and emotional impact of litigation have increased the use of arbitration.

Simply speaking, arbitration is used to resolve disputes outside of courts in both the private and public sector. Arbitration is the most formal alternative to litigation and generally saves time and money because it is usually less expensive and faster than litigation. In this process, the disputing parties present their case to a neutral third party, who renders a decision.

Under the traditional arbitration model, parties voluntarily participate in the arbitration process. Their participation may be the result of a preexisting contractual provision or an agreement that occurs after the dispute has arisen.

Arbitration agreements generally provide a means for selecting the arbitrator or panel of arbitrators, the format of the hearing, the procedural and evidentiary rules to be used, and the controlling law.

Arbitration vs. Mediation

The process used to solve a conflict is the main difference between mediation and arbitration. Both arbitration and mediation will help you solve a legal issue outside of the traditional court process, but they use two different methods to do so.

  • Arbitration : typically, a legally binding process that replaces the full trial process with multiple (often three) chosen people to serve as judges in your case.
  • Mediation : typically, a non-legally binding process generally conducted with a single mediator who does not judge the case but facilitates discussion and eventual resolution of the dispute.

Arbitration is generally conducted with a panel of multiple arbitrators who take on a role like that of a judge, make decisions about evidence and give written opinions (which can be binding or non-binding).

Arbitration and mediation are similar in that they are alternatives to traditional litigation, and sometimes they are used in conjunction with litigation. Both arbitration and mediation employee a neutral third party to oversee the process, and they both can be binding.

Mediation can be used for any kind of dispute. Pre-lawsuit mediation is becoming more widely accepted as a sensible way of resolving disputes before they turn into litigation. Besides being confidential and non-binding, mediation is relatively quick and inexpensive compared to litigating a dispute.

If you want to avoid the high cost of litigation, you might want to consider arbitration. You can speak to arbitration lawyers that can assist you with the dispute that needs to be resolved to find out the best route to take.

Here is an article for more information relating to the difference between arbitration and mediation.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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