What is Arbitration?
An Alternative to a Court Trial
Arbitration is a private, judicial determination of a dispute by an independent third party who is hired by the parties to hear the case and render a decision. An arbitration hearing may involve the use of an individual arbitrator or a panel of any number of arbitrators. Either a single arbitrator or a panel of three arbitrators are the most common. Unlike mediation, the disputing parties hand over their power to decide the dispute to the arbitrator(s). Arbitration is an alternative to litigating in a State court, and generally, is just as final and binding on the parties.
Over the last several years arbitration has become the required method of resolving disputes under many contracts that consumers sign every day. These may include anything from a rental car agreement to a home builder's contract to sell a home.
The general principle of arbitration is that it is to be a process of obtaining a fair resolution of disputes by an impartial third party without the unnecessary expense or delay associated with the court litigation process. It is based on the concept that parties should be free to agree by contract how their disputes are to be resolved, subject only to such safeguards as are necessary to protect the public interest. Arbitrators are typically appointed directly by the disputing parties or by an agreed party, such as the court.
The arbitration process is governed by state or federal law. Most states have provisions in their statutes for arbitration that provide a basic template for the arbitration as well as procedures for then enforcing an arbitrator’s award in the same way as a court judgment. Many states have adopted the Uniform Arbitration Act.