Arbitration is a form of dispute resolution in which decisions regarding resolution of a dispute is made by an individual arbitrator or a group of arbitrators known as an “arbitration board” or “arbitration panel.” Arbitration can be mandatory if it is required by the often-included “arbitration clause” in a contract, provided for by statutory law, or if by the court hearing the original dispute. Parties in a dispute may also enter into arbitration by mutual consent.

The fundamental differences between arbitration and mediation are that (1) mediation of a dispute is voluntary whereas arbitration is usually mandatory and that (2) both parties are usually obligated to accept the decision reached during arbitration (“binding arbitration”) but both parties must voluntarily accept the terms of a mediated resolution. Although mediation is usually conducted by a single individual that is mutually acceptable to the parties concerned, there can be more than one arbitrator involved in a specific instance of arbitration.

Regardless of one’s position in any given dispute that has been submitted to arbitration, there are certain “traits” or “prerequisites” that should be expected of all arbitrators.

– Competence

An arbitrator must have a mastery of the legal principles of arbitration as well as the technical knowledge to fully comprehend what may well become a very technical discussion of scientific or business principles.

– Impartiality

Central to the philosophy of the arbitration process is the insistence that the arbitrator be impartial, and that any decisions reached are based on only the facts of the matter as presented to him or her. Even though the choice of an arbitrator may be unfavorable to one side or the other, the appointed arbitrator must act with complete impartiality.

– Integrity

Any arbitrator’s conduct during the arbitration process must be above reproach. By this it is meant that there must not be even the remotest grounds to suspect that some party to the dispute in question, or some party external to the arbitration, has promised (or even delivered) some later financial or similar inducement to the arbitrator that would cause favoritism toward either side.

Arbitration, although certainly not “cheap,” is usually far less expensive that a formal courtroom trial. Most arbitrators are paid a flat fee based on (1) the dollar value of the issues under consideration, (2) the amount of time involved in hearing the disputed facts, and (3) administrative fees for writing a formal decision or any filings that may be required by a court. These fees will vary considerably, but a figure of $125 per hour is probably close to a median figure.

In the United States, and in addition to the hundreds of individuals and small firms that offer to serve as arbitrators, there are a number of organizations that promote the use of arbitration as a form of dispute resolution. These organizations may contract to have one of their representatives act as an arbitrator or as a referral source.

In the latter case, these groups act in essentially the same way as a trade association: they do not produce the product but, rather, promote the use of the products of a specific industry sector. The major arbitration groups in the United States include:

– Association for International Arbitration –
– United States Arbitration Association –
– American Arbitration Association –

In summary, this section has presented an overview of the arbitration process as well as the role of the arbitrator. Although arbitration is not without costs, it is often far less expensive than trying the disputer before a court of law. As discussed above, there are several personal traits of the arbitrator that are essential to the process of arbitration and should thus be expected on any arbitrator.