In arbitration, the parties to a dispute present their arguments and evidence to an impartial arbitrator who will render an award for one side. Arbritration can either be a legally binding proceeding that is non-applealable or it can be a non-binding proceeding. Unlike mediation, arbitration is a more formal proceeding, with less control in the client’s hands.
At ResRem, the arbitration procedure is conducted by one of our trained and experienced neutrals and usually governed by our Rules of Arbitration. At the end of the arbitration hearing, the arbitrator will render a decision on the merits of the case.
Benefits of Arbitration
- Cost-Effective—Protracted litigation can wreak financial havoc on all sides to a dispute. Arbitration can stop the bleeding, saving thousands in court and attorney’s fees.
- Time Saving—Unlike the backlogged court calendars that can drag litigation over years, arbitration is readily available to resolve the dispute in a timely and expedient fashion. Moreover, arbitration is usually less time consuming than a court trial.
- Privacy—Generally the arbitration proceeding and award are kept confidential, which limits public exposure while preserving traditional practices of jurisprudence in a trial-like setting.
- Minimal Business Interruption—Some commercial disputes require immediate resolution to spare the parties unnecessary business stoppage and lost revenue. Arbitration often affords the flexibility necessary for the realities of the business world.
- Finality—Unless otherwise agreed, the arbitration award is generally appealable under very limited circumstances.
- Choice of Law—The parties can agree to conduct the arbitration under the laws of a specific jurisdiction. For example, an importer of goods from a foreign country can add language to the purchase agreement that stipulates arbitration under the state law of California in the event a dispute arises.
Types of Arbitration
Generally there are three broad sub-categories of arbitration: Binding Arbitration, Non-Binding Arbitration, and Mandatory Arbitration.
- Binding Arbitration—the parties agree to waive their right to a jury trial and appoint an independent arbitrator who will render a decision that the parties are bound to abide by.
- Non-Binding Arbitration—The parties agree to submit their case to a neutral arbitrator, but each party reserves the right to litigate the case in court if they are dissatisfied with the outcome. The arbitrator’s award is essentially an informed opinion of the case that may convince the parties to settle. Since the award is non-binding, the parties retain the option to pursue mediation, binding arbitration, or trial following the proceeding.
- Mandatory Arbitration—The judge presiding over a case may appoint an arbitrator early in litigation if the amount in dispute is too small to justify protracted litigation. Also, contract provisions and statutes may mandate arbitration for certain situations.
Styles of Arbitration
The arbitration may be tailored to suit the needs of the parties and the case. In this regard, several “styles” of arbitration have been developed to maximize the effectiveness and efficiency of the arbitration. The arbitrators at ResRem are well versed in each style of arbitration, and they will use their training and experience to judge which form is appropriate for a given case. The styles listed below are some of the most common variations on the standard arbitration proceeding.
- Bracketed Arbitration—Also known as “High-Low” arbitration, this is a form of arbitration where the parties agree in advance to a specific range in which the arbitrator’s award must fall. They will agree to a “high” end as the maximum award and a “low” end as the minimum award. This is most useful when liability is undisputed, but the parties cannot settle on the amount of compensation. Usually when the parties meet before the arbitration to agree on the high and low ends of the range, they will decide whether to inform the arbitrator of their figures—the arbitration can proceed without disclosing the range to the arbitrator. If the award is larger than the high end, the liable party must pay only the “high” figure that was agreed upon beforehand. Similarly, if the award is below the low end, the liable party will still be bound to pay the agreed-upon “low” figure. This allows the parties to withhold some control from the arbitrator and keep the case within their expectations.
- Pendulum Arbitration—This form of arbitration is commonly referred to as “Baseball Arbitration” because its practice arose from the salary arbitrations for Major League Baseball players. Essentially, each party selects an award and submits it to the arbitrator. The arbitrator will measure the merits of the case and decide it by choosing only one number. The arbitrator cannot split the difference or decide on a figure in between those presented by the parties. The only possible outcomes are those generated by the parties.
- Night Baseball Arbitration—This is a variation of Baseball Arbitration in which the arbitrator is not informed of the parties’ figures. Before the arbitration, the parties exchange figures that represent their expected value of the case and agree to accept whichever number is closest to the arbitrator’s award. Afterwards, the arbitrator conducts a standard arbitration and determines the award. The parties will be bound to the figure that is closest to the arbitrator’s award.
Arbitration is an effective tool for resolving disputes in a timely and equitable fashion. Unlike some ADR outfits, the panel at ResRem does not view arbitration as an excuse to “split the baby” by choosing a middle-ground figure, which essentially amounts to a forced settlement. As a principle of arbitration, the neutral owes the parties a decision, much as a judge on the bench would render. Staying true to the fundamentals of arbitration lends the process its inherent value in both commercial and individual disputes. We’re confident that our professional panel can deliver all the benefits of arbitration to your dispute if you so choose.