Arbitration, by definition, is a binding settlement of a dispute between two or more parties facilitated by a neutral third party without resorting to legal action and thereby, avoiding prolonged and expensive court actions. The arbitration process is meant to resolve disputes in an expeditious and cost-effective way that leads to a satisfactory or agreeable resolution for all parties involved. An arbitration agreement is deemed to include any questions relating to the validity, breach or termination of a legally binding contract. The disputing parties establish an arbitration procedure by referring the dispute to be reviewed by one or more qualified persons. These are known as the arbitrators or Arbitral Tribunal. Arbitrators are often lawyers, retired judges or other professional individuals who have appropriate education, training and experience with the procedures and legalities of arbitration. In Canada, the rules of arbitration dictate that every arbitrator shall be, and shall remain wholly impartial and not act as an advocate for either side of the disputing parties. There are many issues to be considered with an arbitration procedure and it is in the best interests of all parties to proceed with a qualified and experienced arbitrator.
An arbitrator or an Arbitral Tribunal are expected to function similarly to court appointed judges. They are expected to decide the outcome of a dispute based on evidence presented during the proceedings. Relevant law applicable to the dispute must also be considered before a final decision can be reached. All parties entering into arbitration must agree to arbitrate and must therefore sign a binding arbitration agreement before commencing. All arbitrations are expected to be conducted under the guidelines of the Law of the Arbitration and if there are any conflicts with the provisions presented by any party, the provisions of the Law will always prevail. Decisions have to be made as to whether the arbitration can be conducted in writing or if an oral hearing is necessary. Where the hearing will be held and how much time will be needed has to be determined. If witnesses are going to be part of the proceedings, a format for the presentation of their evidence has to be agreed to. If written statements are required, there needs to be an organized and agreed upon method of delivering the statements to the disputing parties. Expectations of what the arbitrator will be providing needs to be established, such as: does the arbitrator have to deliver reasons for the decisions made? Also, there has to be a form of an award agreed to. Not all awards are of a monetary nature.
Evidence of the dispute is presented and evaluated by the selected arbitrators and based on this evidence, a decision as to what is fair is arrived upon. This decision would be legally binding on the disputing parties and would therefore, be enforceable in a court of law. Arbitration can be used to resolve commercial disputes, international interactions, employment issues, real property issues, marital property division after a break down in a relationship, and custody issues (not a complete list). Parties can enter into an arbitration dispute resolution procedure voluntarily. However, in some cases, if a statute or a voluntarily entered into previous contract mandates all future disputes be resolved via arbitration, arbitration becomes mandatory. Although there are non-binding arbitration procedures, this process is more a form of mediation and a decision cannot by enforced by either of the disputing parties. In non-binding arbitration, the arbitrator is not involved in the settlement process and will usually just evaluate potential liability or indicate damages payable.
The disputing parties involved in an arbitration procedure have limited rights to request a review or to appeal arbitration awards. As an example, per Canadian rules of arbitration: within twenty days after an award has been released, based on an involved parties’ request – the arbitrator or Arbitral Tribunal may amend an award to correct any clerical errors, any accidental errors or omissions, any mathematical errors made in computation of amounts, or address any claims the arbitrator failed to adjudicate. In most legal systems, whether addressing common law disputes or civil law disputes – the costs of an arbitration are usually assessed against the losing parties. This is to address the fact that the winner of an arbitration decision has been further injured by having to pursue avenues of recovery that have a monetary cost involved and also a time component. In Canada, an arbitrators fees are subject to review by the Canadian Arbitration Association if the chosen arbitrator is not a member of the Association. The assumed goal of any arbitration is that it be conducted as inexpensively and expeditiously as reasonably possible while maintaining an acceptable level of fairness that is suitable to the prevailing circumstances.