Arbitration is an alternative to a trial. It is appropriate when the parties have been unable to reach agreement through mediation or direct negotiation.
Arbitration is different from mediation, in that the Arbitrator actually decides the matter. In contrast, a Mediator facilitates a resolution by the parties themselves. A mediation is informal; an arbitration may have the formality of a trial.
Arbitration is like a trial in that each party presents its case to a knowledgeable, neutral person (the Arbitrator) in a hearing, which may or may not be recorded. Sworn testimony may be taken, and documents placed in evidence. The Arbitrator will rule on objections and enforce the rules agreed to by the parties beforehand. He/she will make findings of fact and decide the matter in accordance with the law, in a written decision called an Award, which is enforceable in a court.
Arbitration is different from a trial, in that:
(1) A trial record is generally public; arbitration is private and, by agreement of the parties, confidential.
(2) An arbitration is generally final, i.e., it cannot be appealed. When the matter is decided, the parties can move on with their lives.
(3) Parties can obtain a hearing quickly, at a time convenient to them. In contrast, civil court cases can take as much as three years to come to trial, and may be dragged out even longer by appeals.
(4) Parties can choose their Arbitrator; they cannot choose the judge.
(5) An Arbitrator receives a fee, generally split evenly between the parties. A judge is paid by the government, not the parties. However, many costs associated with court trials (such as witness fees, service, depositions, and written transcripts) may be avoided by agreement.
(6) Court trials are constrained by statutory rules of evidence and procedure. In an Arbitration, parties can, to a large extent, choose the rules under which they wish to proceed. For instance, they can decide:
Will the proceeding be recorded?
Will rules of evidence apply? For instance, will hearsay be allowed?
Will live testimony be taken, or will the matter be decided on written statements such as affidavits?
Will discovery be allowed? If so, what kind and how much? The parties may wish to set a cut-off date or ask the Arbitrator to do so.
Will there be an Award "with reasons" (citing law, for instance), or simply a finding of facts and a decision.
Arbitration may be the process you choose when you want fast, final, and cost-effective results.