What is arbitration?

Every now and then, disputes between business partners, contractors and sub-contractors in a construction setting can arise. For instance, when a dispute arises in the construction industry, the parties have the option to litigate the matter or they also have the option to partake in an alternate dispute resolution options such as arbitration.

In essence, arbitration is an alternative to litigation. Arbitration, in most cases, allows for a quicker resolution of the dispute in a much more cost-effective manner than the often expensive and time-consuming option of battling it out through the court system. Essentially, when both parties agree to resolve their dispute through arbitration, they agree to allow an impartial third party, who can be a single individual or a group of people, look over the facts of the dispute and render a decision, which may include an award of compensation to be paid by one or more parties. The decision that the arbitrator makes is in writing and is considered final, as well as binding on all parties involved.

The arbitration process requires a party to file a demand for arbitration by paying a filing fee. Once filed, a deadline is set to allow parties to answer or counterclaim. The parties can select arbitrators from a list of qualified individuals and once both parties agree on the person or persons, the process of arbitration can commence. At the first hearing, which is also referred to as the preliminary hearing, the parties exchange information with the chosen arbitrator who is overseeing the exchange of information. In addition to the major issues involved in the case, procedural matters are also discussed at this stage.

After information is exchanged, the next step is to conduct a hearing, wherein each party has the opportunity to present evidence so that the arbitrator can make a decision on the matter. After the arbitrator considers all the evidence and hears testimony, the arbitrator will make a decision on the case.

Source: American Arbitration Association, "Arbitration," accessed March 23, 2015

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