No one wants to think their relationship with another party will deteriorate; however, things do often fall apart, for a variety of reasons. Therefore, for those who are accustomed to entering into long-term contractual arrangements, having an arbitration clause in the contract is a good tactical move and will allow the parties to prepare for the worst.
What is Arbitration?
Arbitration is a faster, less expensive, and private process by which all parties agree, in writing, to submit their disputes to one or more impartial persons authorized to resolve the controversy by rendering a final and binding award.
Arbitration is guided by relatively informal procedures. Traditional courtroom rules of evidence are not strictly applicable. There is an informal discovery procedure. However, the arbitrators must make a final decision once all relevant information is present.
The written agreement is used to resolve any future dispute by the use of impartial arbitration. It is the key in a contract for resolution of future disputes; through the contract, the parties have come to an agreement to submit to arbitration any dispute, if and when it arises.
Another key benefit to having an arbitration agreement is it settles disputes over the locale of the proceedings. When the parties disagree, locale determinations are made by the American Arbitration Association (“AAA”) as the administrator, thereby precluding the need for intervention by a court.
The standard arbitration clause may also include reference to the American Arbitration Association’s optional rules for emergency measures of protection, before an arbitrator is sleeved, and for expedited arbitration. If the parties wish, standard clauses may also be used for negotiation and mediation. There are also standard clauses for use in larger, more complex cases. The AAA rules generally provide that any administrative fees be borne as incurred, and the arbitrators’ compensation be allocated equally between the parties. Fees and other costs can be dealt with in the arbitration clause.
Who are the Arbitrators?
The AAA maintains a screened and trained pool of available experts. Arbitrators are impartial and knowledgeable neutrals parties that are chosen to serve. Neutrality is a crucial part of being an arbitrator. Under the AAA rules, an arbitrator can be disqualified for showing any bias.
Usually, there are three arbitrators per dispute. Each party will choose one arbitrator, and the two will then select the third. They are selected for a specific case because of their knowledge of the subject matter; they are viewed as experts. Based on their experience, arbitrators will render an award grounded on thoughtful and informed analysis. The parties can request a reasoned award, and the arbitrators will provide conclusions based on law.
Arbitration is a private dispute resolution method. Unlike court cases, whose judgments are public, the arbitral award is not released to the public.
Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration without the prior written consent of both parties.
Arbitration is great method of resolving conflicts between parties. Contact us today to learn how to utilize arbitration as a conflict resolution tool to meet your needs.