Arbitration FAQ | The Gould Firm

What Is Arbitration?

Arbitration can be either binding or non-binding. Binding arbitration is a procedure by which parties agree to submit their dispute or claims to a third party, known as an arbitrator. The arbitrator is a neutral who will preside over a hearing conducted in a less formal manner than a judge in a court trial. The arbitrator guides the case while the parties put on witness and or evidence. The arbitrator considers the evidence and arguments from all sides then renders a written final and binding decision. The parties may select the rules and procedures to govern the arbitration proceedings. The parties may also choose to agree to certain minimums and maximum amounts the arbitrator may award giving the parties some control over the outcome and a means to reduce the risk or exposure or even to guarantee a claimant some type of recovery. Most arbitration matters can be heard in much less time than the same case would take if heard by a judge in a courtroom. This will reduce the cost each side might incur with lawyers’ fees, etc.

Non-binding arbitration is the type of arbitration where the arbitrator makes a determination of the facts, law or the rights of the parties to the dispute. The arbitrator’s decision, however, is not binding on the parties but may be instructive and ultimately assist them to understand how the case could result if it were to go to court or, to a binding proceeding. In many cases, the arbitrator’s decision will motivate the parties to reach a negotiated settlement shortly after the hearing.

How Is Mediation Different Than Arbitration?

Mediation and arbitration differ in that an Arbitrator has the authority to make a decision without the approval of both parties. An arbitrator is thus the judge of the evidence and facts and has the authority to make a decision over both parties without their consent. Consequently, since the stakes are higher in arbitration, it typically follows a more court-like process with formal rules, the calling of witnesses, presentation of evidence, formal arguments, etc.

What Are the Potential Drawbacks of Arbitration?

In most cases arbitration is binding and you cannot appeal an arbitrated decision. In most cases, you do not have any recourse if the arbitrator makes a mistake of fact or law. You also do not have the same right to a discovery process the way you would in a traditional trial unless the arbitration agreement or arbitrator allows it. This could be helpful or harmful depending on your position.

What Are the Benefits of Arbitration?

As with mediation, arbitration takes far less time and costs far less money than traditional litigation, and the results of arbitration are often kept confidential. Furthermore, the decision of an arbitrator is often legally binding.

How Does Arbitration Differ From Mediation?

In mediation, the neutral third party helps the parties involved in the dispute to work through their issues and reach an agreement. An arbitrator, on the other hand, listens to all of the involved parties gives their side of the case and then reaches his or her own legally binding decision.