Nature of arbitration
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed will be final and binding. Arbitration is not the same as:
Judicial Proceedings, although in some jurisdictions, court proceedings are sometimes referred as arbitrations
Alternate Dispute Resolution (or ADR)
Expert determination
Mediation
Advantages and disadvantages of arbitration
Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:
when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed
arbitration is often faster than litigation in court
arbitration can be cheaper and more flexible for businesses
arbitral proceedings and an arbitral award are generally secret
because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments
in most legal systems, there are very limited avenues for appeal of an arbitral award
However, some of the disadvantages of arbitration can be that:
consumers and employees usually do not know in advance that they have been forced into mandatory binding pre-dispute arbitration by purchasing a product or taking a job
if the arbitration is mandatory binding pre-dispute arbitration, the individual must, in advance, give up his or her right to access the courts and have a judge or jury decide the case
the parties need to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes
a recovery of attorneys' fees is usually unavailable, making it difficult or impossible for consumers or employees to get legal representation
the arbitrator depends on the corporation for repeat business, so there is an inherent incentive to rule against the consumer or employee
there are very limited avenues for appeal, which means that an erroneous decision cannot be overturned
although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
in some legal systems, arbitral awards have fewer enforcement remedies than judgments
arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore
rule of applicable law is not binding, and arbitrators not subject to overturn on appeal may be more likely to rule according to their personal ideals
large corporations may exert inappropriate influence in consumer disputes, pressuring arbitrators to decide in their favor or lose future business
Arbitrability
By their nature, the subject matter of some disputes are not capable of arbitration. In general, two groups of legal procedures cannot be subjected to arbitration:
Procedures which necessarily lead to a determination which the parties to the dispute may not enter into an agreement upon: Some court procedures lead to judgments which bind all members of the general public, or public authorities in their capacity as such, or third parties, or which are being conducted in the public interest. Examples: Until relatively recently (80s), antitrust matters were not arbitrable in the United States. Matters relating to crimes, status and family law are generally not considered to be arbitrable, as the power of the parties to enter into an agreement upon these matters is at least restricted. However, most other disputes that involve private rights between two parties can be resolved using arbitration. In some disputes, parts of claims may be arbitrable and other parts not. For example, in a dispute over patent infringement, a determination of whether a patent has been infringed could be adjudicated upon by an arbitration tribunal, but the validity of a patent could not: As patents are subject to a system of public registration, an arbitral panel would have no power to order the relevant body to rectify any patent registration based upon its determination.
Some legal orders exclude or restrict the possibility of arbitration for reasons of the protection of weaker members of the public, e.g. consumers. Examples: German law excludes disputes over the rental of living space from any form of arbitration, while arbitration agreements with consumers are only considered valid if they are signed by either party, and if the signed document does not bear any other content than the arbitration agreement.
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