What is Arbitration?

Introduction to Arbitration: A Private Legal Process

Arbitration is similar to a court, but there is a private judge. The judge is selected by the parties to the arbitration or by the arbitration governing body. Arbitration is private, meaning anything filed through arbitration is not part of a public record. Searching and seeing how often a person or business has been in arbitration is nearly impossible. To have a dispute handled in arbitration, the parties must mutually agree to handle it. The parties can decide this at the outset (before there is an issue) or once there is an issue.

Typically parties will determine at the start of any relationship that they want any disputes resolved through arbitration. To do this, the parties will include a provision explicitly stating how disputes will be handled in whatever contract they enter. Typically the provision will name an arbitration provider who will oversee the arbitration. Less commonly, parties will be in dispute and unable to resolve the dispute and will agree to have arbitration to resolve the dispute. 

Choosing the Arbitrator: The Role of Private Judges

Retired judges and seasoned attorneys serve as “neutrals'' for the case. The parties to the arbitration can select the neutral or at least narrow down the options for the person who serves as neutral. The arbitration provider will issue to each party a list of possible naturals who can handle the particular case. The parties then will either rank their choices or “strike” a set number of neutrals they do not want to handle their case. The arbitration provided will use these lists to find whichever neutral both parties can tolerate. If there is no mutually agreeable neutral, the provider will select one. The neutral acts like a judge - ruling on motions, issuing subpoenas, and issuing orders. 

Understanding Arbitration Rules and Procedures

Each arbitration provider has its own rules and procedures that govern the process. These rules and procedures work in tandem with the state civil rules of procedure; however, if there is a conflict between a civil rule and arbitration, the arbitration rules will prevail. The provider’s rules will also govern what party(s) to the arbitration will pay the provider’s fees. Typically the providers require an upfront deposit before any arbitration can commence. Typically in cases brought by a consumer, the business bears almost the entire cost of arbitration. Meaning the business pays their attorney and the neutral. If the party responsible for paying the deposit fails to pay the deposit, the non-paying party is typically free to file in a court of competent jurisdiction, bypassing the contractual language for arbitration due to non-payment. 

Major Arbitration Providers: JAMS and AAA

The US has two major arbitration providers - the Judicial Arbitration and Mediation Services, Inc., (JAMS)  and the American Arbitration Association  (AAA). There are many industry-specific and regional arbitration providers outside the national providers.  The organizations that provide arbitration provide case managers who facilitate communication between the parties to the arbitration and the neutrals, replacing the role of a clerk of court in civil litigation.