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Arbitration and Its Role in Dispute Resolution Essay

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Updated: Mar 7th, 2022

Introduction

Arbitration is sufficiently a wide notion. However, the main concept of arbitration can be seen as the most ancient form of dispute resolution, where the mediatory functions performed by arbitrators preceded governmental authorities. Today there are many arbitration and arbitration tribunals in the world, being one of the most effective methods for dispute resolution. In that regard, this paper provides an analysis of the essence of arbitration along with its role in the alternative dispute resolution process.

Overview

Defining arbitration it can be said that it is a judicial mechanism for solving conflicts, where the dispute is submitted to “one or more impartial persons for a final and binding decision, known as an “award.” (“Arbitration”) The main principle in arbitration is its voluntary nature, where parties are the ones who decide should the conflict be solved through arbitration, where it should be solved, and where the awards should be executed. The procedures and the rules of arbitration cover wide conditions and circumstances, where there are commercial, consumer and labor rules specified in arbitration in a wide variety of industries. (“Arbitration”) Arbitration is a form of alternative dispute resolution (ADR), where arbitration as other forms of ADR is a private method, where “[a]n arbitrator or panel of arbitrators conducts an information-gathering process, which may include document exchange, briefing and testimony of witnesses.” (Bennett 4-5) Although the parties have the right to appeal, the awards are usually “conclusive, final, and binding.” (Leb) Privacy was mentioned as one of the aspects of the arbitration, there are other advantageous characteristics that make parties prefer such solutions to their disputes. Usually, these characteristics include but are not limited to the following:

  • Choice of decision-maker – an important factor, especially when there are disputes requires certain knowledge and expertise. In the case an agreement was not reached regarding the person who will serve as an arbitrator, there is an option for sponsoring organizations that provide a list of potential arbitrators. (Bennett 6)
  • Flexible rules – the flexibility in rules allows the parties to make sure that the best resolution will be reached.
  • Reduced costs and time – this factor is not proven, but nevertheless, it is believed that the streamlined procedures, which are typically employed, can “improve the efficiency of the decision-making process.” (Bennett 4)
  • Recovery of costs – this factor forces the party that lost the decision to pay the system, which reduces increases the possibilities of settlement.
  • Neutral territory – this factor eliminates the home court factor when resolving a dispute.

Domestic and International Arbitration

Domestic arbitration and international arbitration do not differ substantially, except for one factor. The factor is that the regulation of domestic arbitration has a distinguished enforcement mechanism, while international arbitration can be seen lacking where the implementation of the awards can be more than difficult in “cases where parties decide not to abide by the decision.” (Leb) In that regard, there is a dispute whether international arbitration can be considered as an ADR. Such a statement can be considered controversial and contradict the main characteristics of arbitration. For example, The International Chamber of Commerce Amicable Dispute Resolution system excludes arbitration, while other institutions considered both approaches as alternatives. In that regard, the difference between domestic and international arbitration can be narrowed to the fact that domestic arbitration can be related to the dissatisfaction with the current litigation system, while international arbitration resolving disputes can be related to the neutrality of the chosen arbitration, due to the difference in the rules and laws in parties’ home courts. In that sense, the attractiveness of arbitration is serious can be seriously reconsidered if taking the possibility of enforcement absence. Accordingly, the role of other methods of ADR might be reconsidered.

The Role of Arbitration in ADR

The role of arbitration in ADR can be seen through a comparison with other forms of ADR such as mediation, and accordingly with its disadvantages. In that regard, the main difference can be seen in arbitration having win-lose solutions, while mediation has win-win, and the possibility for appeal, where arbitration might have this possibility while mediation does not. (Leb) In other factors, both arbitration and mediation have similar roles, and both differ from conventional dispute resolution processes. Accordingly, if omitting the possibility of the enforcement disadvantage. Arbitration can be seen as an established aspect of ADR, both domestically and internationally. For example, in regard to the domestic ADR regulations in the United States, the Alternative Dispute Resolution Act requires that every federal district court authorize “the use of alternative dispute resolution processes in all civil actions” (Bennett), offering at least one form of ADR including arbitration.

Another opinion can be seen that arbitration is gradually increasing its formalization processes, which makes resorting to arbitration becoming more and more similar to the court jurisdictions. (Vicuna) In that regard, the role of arbitration can increase if proper mechanisms were provided in terms of enforcement, and revisions were made to the formal aspect of arbitration procedures.

Conclusion

It can be concluded that arbitration is an effective method for dispute resolution, which has distinct characteristics that make it preferable as an ADR. Arbitration has a large role as an ADR, especially in the international context, where many business contracts include an obligatory clause regarding arbitration as an alternative dispute resolution process. Nevertheless, it should be noted that the criticism regarding the enforcement process requires the establishment of a particular mechanism for that procedure. In that regard, with proper mechanism applied, the factor of the country as enforcement location will be eliminated.

Accordingly, the other side of such an approach is that institutionalizing the arbitration process will lead to losing the characteristics that distinguished arbitration from litigation, leaving only the aspect of privacy. Regarding the domestic arbitration procedures, it can be said that the US ADR act provides the necessary tools for the arbitration to be implemented and enforced in case the party that lost refused to comply with the award. In that regard, arbitration is a valuable ADR in the federal or state court systems.

Works Cited

“Arbitration”. 2009. American Arbitration Association. Web.

Bennett, Steven C. Arbitration: Essential Concepts. New York: ALM Pub., 2002.

Leb, Christina. . 2003. Beyond Intractability. Eds. Guy Burgess and Heidi Burgess. Conflict Research Consortium, University of Colorado.

Vicuna, Francisco Orrego. “Arbitration in a New International Alternative Dispute Resolution System.” Dispute Resolution Journal (2002). Web.

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