Description of the legal term Arbitration:
Arbitration is a form of alternative dispute resolution in which disputing parties agree to submit their dispute to one or more impartial third parties, known as arbitrators, for a binding decision. Unlike court proceedings, arbitration is usually less formal, more flexible and can be quicker and less expensive. It is a private process, often chosen for its confidentiality and the expertise of the arbitrators in specific fields.
The process begins when the parties agree to arbitration, either by a clause in a contract or by a separate agreement after a dispute has arisen. The role of the arbitrator is to consider the evidence, listen to the parties and make a decision that is legally binding and enforceable, similar to a court judgment. Parties often choose arbitration because of its ability to provide expertise, its flexibility in terms of procedure and timing, and the finality of the decision, as there are limited grounds on which an arbitral award can be challenged in court.
Legal context in which the term Arbitration may be used:
Example 1: Commercial contract dispute
Company A and Company B have a long-term contract for the supply of goods. The contract contains an arbitration clause for the resolution of disputes. When a dispute arises over the quality of the goods supplied, both companies agree to settle the dispute by arbitration. They choose an arbitrator with expertise in commercial contracts and the specific industry. The arbitrator reviews the contract, the standards of the goods supplied and hears arguments from both sides. Based on this, the arbitrator makes a decision that the goods did not meet the agreed standards and orders Company A to compensate Company B. This decision is binding on both parties and they avoid a lengthy court case.
Example 2: Employment dispute
An employee, John, has a dispute with his employer about unfair dismissal. Their contract of employment provides for arbitration to resolve such disputes. An independent arbitrator with expertise in employment law is chosen. During the arbitration, both John and the employer present their cases, including evidence and witness statements. The arbitrator finds that John was unfairly dismissed and orders the employer to pay him fair compensation. By choosing arbitration, both parties get a quicker resolution than what might have been a lengthy court case, and they benefit from the arbitrator’s specialised knowledge of employment law.
As you can see, arbitration is an effective alternative to traditional court proceedings, offering a more specialised, flexible and often quicker way of resolving disputes. The process plays an important role in commercial and employment contexts, among others, by providing parties with a mechanism to resolve their disputes privately and efficiently.