Arbitration

Definition

Arbitration is a method for the resolution of disputes outside the judicial court system, where the conflicting parties present their case to one or more arbitrators who then render a decision. The process is typically private and can be either binding or non-binding, depending on the terms agreed upon by the parties. Binding arbitration means that the arbitrator’s decision is final and enforceable in courts, whereas non-binding arbitration allows parties to seek other legal remedies if they are dissatisfied with the arbitrator’s decision.

Examples

Commercial Contracts: Businesses often include arbitration clauses in their contracts to ensure any disputes are resolved through arbitration rather than litigation. This can save time and money while maintaining confidentiality.
Employment Disputes: Many employment contracts require arbitration for disputes related to job terms or wrongful termination.
Construction Industry: Disputes regarding construction projects, often complex and technical, are frequently resolved through specialized construction arbitration panels.
Consumer Agreements: Some companies include arbitration clauses in their terms of service to manage disputes with consumers without resorting to court litigation.

Frequently Asked Questions

Is arbitration legally binding?

Arbitration can be legally binding if both parties agree to it in advance. This means the decision of the arbitrator is final and enforceable in court. Non-binding arbitration permits further legal recourse if either party disagrees with the arbitrator’s decision.

What kinds of disputes can be settled through arbitration?

Arbitration is suitable for virtually any civil dispute, including commercial conflicts, employment disagreements, and consumer disputes. Criminal matters, however, cannot be resolved via arbitration.

How does one initiate arbitration?

To initiate arbitration, the party seeking resolution must refer to the arbitration clause in the contract which outlines the procedure. Notices are sent to the other party, and an arbitrator is selected as per the contract terms or arbitration institution rules.

Can parties choose their arbitrator?

Yes, parties can typically select their arbitrator(s) either by mutual agreement or from a panel provided by an arbitration institution. Some contracts specify an arbitrator or a method for choosing one.

What is the role of the Arbitration Act 1996?

The Arbitration Act 1996 is the current legal framework governing arbitration procedures in the UK. It establishes rules and guidelines, ensuring fairness and consistency in arbitration processes.

Arbitration Clause: A clause in a contract that requires the parties to resolve their disputes through arbitration.
Mediation: A form of alternative dispute resolution where a neutral third party aids in resolving the dispute, typically without binding authority.
Litigation: The process of taking a case to court to settle a dispute.
Binding Arbitration: A type of arbitration where the arbitrator’s decision is final and enforceable in courts.
Nonbinding Arbitration: A type of arbitration where the arbitrator’s decision can be appealed or pursued further in court if either party is dissatisfied.

Online References

Arbitration Act 1996 - Official UK legislation on arbitration procedures and guidelines.
American Arbitration Association - Information and resources from a major arbitration institution.
Chartered Institute of Arbitrators - A global organization for promotion and facilitation of arbitration.

Suggested Books for Further Studies

“The Principles and Practice of International Commercial Arbitration” by Margaret L. Moses
“Redfern and Hunter on International Arbitration” by Nigel Blackaby, Constantine Partasides, et al.
“International Commercial Arbitration” by Gary Born
“Arbitration Law” by Michael Mustill and Stewart Boyd
“Commercial Arbitration: Cases and Problems” by Domke on Commercial Arbitration

Accounting Basics: “Arbitration” Fundamentals Quiz

### Can civil disputes be decided through arbitration? - [x] Yes - [ ] No > **Explanation:** Arbitration is specifically used for resolving civil disputes outside of the court system. ### Can criminal matters be resolved through arbitration? - [ ] Yes, if both parties agree. - [x] No, only civil matters can be arbitrated. - [ ] Sometimes, depending on the jurisdiction. - [ ] Only minor criminal cases. > **Explanation:** Arbitration is not applicable to criminal matters; it is exclusively used for civil disputes. ### What is an arbitration clause? - [ ] A clause that allows a civil court to decide on disputes. - [x] A clause in a contract that requires disputes to be resolved through arbitration. - [ ] A legal requirement for any commercial transaction. - [ ] A penalty clause in trade agreements. > **Explanation:** An arbitration clause requires the parties to resolve their disputes through arbitration instead of litigation. ### Is an arbitrator's decision always binding? - [ ] Yes, without exceptions. - [ ] No, it is never binding. - [x] It can be, depending on the agreement between parties. - [ ] Only if it's stated in the arbitration clause. > **Explanation:** An arbitrator's decision can be binding if both parties have agreed to binding arbitration. ### What legal framework governs arbitration in the UK? - [x] The Arbitration Act 1996 - [ ] The Commercial Arbitration Rules - [ ] The Arbitration and Conciliation Act - [ ] The Dispute Resolution Act > **Explanation:** The Arbitration Act 1996 is the current framework governing arbitration procedures in the UK. ### Who typically selects the arbitrator(s) in a dispute? - [ ] The local court - [ ] The government - [x] The parties involved in the dispute - [ ] An arbitration tribunal > **Explanation:** Parties involved in the dispute generally select the arbitrator(s), either by mutual agreement or through a method outlined in their contract. ### Can parties appeal an arbitrator's decision if binding arbitration was agreed upon? - [ ] Yes, always. - [ ] No, it is final and cannot be appealed. - [ ] Only in certain special circumstances. - [x] No, the decision is final if binding arbitration was agreed upon. > **Explanation:** If binding arbitration was agreed upon, the arbitrator's decision is final and cannot generally be appealed. ### What is one major benefit of arbitration over litigation? - [ ] It is always cheaper. - [ ] It always takes less time. - [x] It maintains confidentiality. - [ ] Decisions are always better. > **Explanation:** Arbitration's confidentiality is a major benefit as compared to the public nature of court proceedings. ### In arbitration, what type of disputes can be arbitrated? - [ ] Only business disputes. - [ ] Only employment disputes. - [x] Virtually any civil dispute. - [ ] Only disputes less than a certain monetary value. > **Explanation:** Arbitration can handle virtually any civil dispute, with exclusions primarily around criminal matters. ### Does the Arbitration Act 1996 apply internationally? - [x] No, it applies to arbitrations in the UK. - [ ] Yes, it is internationally recognized. - [ ] Only within certain international agreements. - [ ] It applies mainly to European arbitrations. > **Explanation:** The Arbitration Act 1996 applies specifically to arbitrations conducted within the UK.

Thank you for exploring the essentials of arbitration and challenging yourself with our detailed quiz questions. Keep diving into the world of dispute resolution!