Arbitration is a process where the parties have agreed, usually by contract, that in the event of a disagreement, they will bring the conflict to an arbitrator to resolve rather than taking it to court. The parties are looking for more efficient resolution to the disagreement. They require a neutral third party to make a decision for them which they cannot negotiate themselves. The role of an arbitrator, like the role of mediator, requires an impartial neutral party. The arbitrator acts like a judge or is one neutral on a panel of three neutrals. One or more neutrals hear the evidence and make a decision, either written or oral, depending on the parties' requirements.

Arbitration is a binding form of dispute resolution. It permits parties to submit their dispute to an independent third party who functions much like a judge. Like a court trial, arbitration may include representation by counsel, pre-hearing discovery, written briefs, examination of witnesses and oral argument. By contract or agreement before the process begins the decision is to be either binding or non-binding. If the process calls for binding arbitration, the decision is final and may be enforced by the successful party. If the process provides for non-binding arbitration, the decision is only advisory and may be rejected by any party.

The parties may become involved in the arbitration process in one of three ways: court ordered, by stipulation or contractual.

In a court ordered arbitration, the judge has ordered the parties to arbitrate based upon certain aspects of their dispute. The court itself sponsors an arbitration program and will facilitate the process. Court ordered arbitrations are non-binding, meaning that either party that is dissatisfied with the award of the arbitrator may request a new trial. Since the process is non-binding, no party has given up any constitutional rights by engaging in arbitration.

In arbitration by stipulation, the parties have chosen to go to arbitration instead of through a court trial. Under this scenario, the parties have agreed to arbitrate after the dispute has arisen. There is no appeal process in traditional arbitration and thus the award of the arbitrator is final except for the most extraordinary circumstances.

In contractual arbitration, the parties have agreed pursuant to a contract between them that in the event of a dispute, the matter will be arbitrated. Generally there will be a set of rules or procedures incorporated into the arbitration clause that dictate how the parties will proceed. The parties must then choose which set of rules and procedures to follow to guide the proceedings. For a sample arbitration clause that can be used in a transaction document, please refer to our website. NEMLS can also customize dispute resolution clauses for clients upon request. Please contact us at 603-870-9790.

The advantages of process arise from the ways in which arbitration differs from a court trial. First, arbitration procedures are flexible and less formal. This flexibility can lead to significant savings in terms of time and expense. Another benefit is that the parties can choose their arbitrator directly which enables them to pick someone with the requisite amount of experience and subject matter expertise to render an accurate award. Finally, the arbitration process is private and confidential, and usually final.