Arbitration Explained for Self-Represented Parties

Arbitration is a form of Alternative Dispute Resolution (ADR) that provides a less expensive, less time-consuming, and potentially less contentious forum for resolving business disputes than litigation. Procedures established by the American Arbitration Association (AAA), the Judicial Arbitration and Mediation Service (JAMS), the Financial Industry Regulatory Authority (FINRA), or other entities govern the arbitration process.

There are two types of arbitration – binding and nonbinding:

• Binding arbitration requires the parties to accept the arbitrator’s decision as final and is very difficult to appeal.
• Nonbinding arbitration allows either party to reject the arbitrator’s decision or an award, but the process can help to facilitate a resolution.

Parties that enter a business relationship or sign a contract with an arbitration clause agree to arbitration that is typically binding unless they agree to nonbinding arbitration beforehand. In some cases, the courts may also order disputing parties to participate in an arbitration proceeding. In any event, the parties submit their case before a neutral, third-party arbitrator (or a panel of arbitrators) who will render a final decision.

Certain aspects of arbitration are similar to litigation, but the process is far more streamlined. 

Notably, the parties and the arbitrator can determine the rules and scope of arbitration proceedings, making the process quicker and less expensive than litigation. 

In addition, the parties have control over the scheduling. Unlike a trial, which can take years to conclude, an arbitration hearing can be scheduled once the parties are ready, sometimes within months. Also, arbitrations are private, whereas trials are public proceedings. If your business values confidentiality, arbitration provides a significant advantage over litigation. 

Most arbitrations include a discovery phase; however, discovery is informal and limited, guided by the rules under which the arbitration proceeds and the agreement of the parties. 

Unlike a jury trial, an arbitrator will preside over the case, not a judge. The arbitrator will hear arguments and evidence from each side, make decisions regarding procedure and evidence, and make a final decision, known as an arbitration award. The arbitrator’s decision will bind the parties unless there are grounds to challenge the decision in court.

The arbitration process is less expensive than a trial; however, arbitration costs are not insignificant and may include:

• Filing fees
• Administrative fees
• Arbitrator’s fees

Costs may vary based on the amount in dispute. The amount paid by each side is generally governed by the rules under which the arbitration proceeds or by agreement of the parties.

Unlike a court order, an arbitration award does not gain the immediate force of law. However, the prevailing party may petition a court to confirm the award, after which it is enforceable just as it was a judgment rendered by the Court.