Arbitration is a process of ending an argument or dispute. It’s a decision on what, who wins and how will the problem be solved. Arbitration also means making a conclusion or judgment. It is simply an Alternative Dispute Resolution (ADR) system.

Settlements can be done privately by both parties involved or by court hearings. If both parties wish to settle their arguments without court involvement, they can ask for a person to decide the case for them. The deciding person is called the “Arbitrator”. An arbitrator is someone who is officially chosen to make a decision that will end disagreement without going to court.

Note that an arbitrator is chosen by “both” individuals. Proceedings made in this case are private and in a confidential manner. An arbitrator not only resolves the dispute but also makes a tying decision.

Now, what would be the advantages of having an arbitrator to settle the issue instead of going to court? The arbitration may be fast and effective but also has its disadvantages. The technical nature of the arbitration process can lead to delays and may have uncertain results. The power of the arbitrator is also limited as he cannot order pre-empted injection, only the courts can grant it.

Yet, there are advantages to opt for arbitration too, for instance, the disputing parties can decide on where they wish to settle the issue and also have confidentiality as arbitration is done in private. This apart, the arbitrator’s decision is final with no right to appeal, which means both parties no longer need to spend more time and money compared to going through lengthy court hearings.

However, if the other individual does not agree on the terms given by the arbitrator, the situation is taken to court, have the judge make a judgment, and enforce it. The arbitration may be fast and effective but also has its disadvantages. The technical nature of the arbitration process can lead to delays and may have uncertain results. The power of the arbitrator is also limited as he cannot order pre-empted injection, only the courts can grant it. There is also the lack of transparency on arbitration confidentiality which may result in bias.

Confidentiality is also lost when one of the parties does not comply with the decision. This will then be taken to the court for judgment. It is not possible to correct or appeal the finality of the arbitrator’s wrong decision. Also, the arbitration process is expensive, especially the fee for the arbitrator and the experts in technical reports. Arbitration is also not ideal when large parties are involved in a dispute.

What are the types of arbitration?

There are three types of Arbitration namely Arbitration Clause, Submission Agreements /Arbitration Deeds, and Arbitration Agreement incorporated by reference.

Arbitration Clause is a contract in which both parties acknowledge that it requires them to resolve their issues in arbitration. The contract contains an agreement that both parties will not sue each other but have decided to resolve their issues through arbitration instead. Once you sign the contract, you are already giving up your right to go to court.

Second is the Submission Agreements also known as the Arbitration Deeds, and sometimes called “Terms of Reference.” This is an agreement to have an arbitration when a dispute arises. It entails details of arguments and issues between both parties involved. It contains important details such as legal and technical details. The purpose of this agreement is to define and specify the scope of arbitration.

And lastly, Arbitration Agreement is a written contract signed by parties agreeing not to go outside the court and just settle their dispute in arbitration.  It is simply a provision that by signing the contract you are agreeing to settle a dispute which has already arisen or may have arisen in an arbitration process.  The agreement should also be in the form of writing and signed by both parties. The contract to a document comprising an arbitration clause composes an arbitration agreement if the contract is in writing. It serves as a reference that the arbitration clause is a section of the contract.

The arbitration process may have its positive and negative side but the agreement to opt for this kind of process must be made by both parties. Though it is not time-consuming like court proceedings, it will, however, certainly cost you a lot of money. Make sure to understand the contract or consult legal experts before signing the agreement. Better understanding and knowing your rights will help you decide whether you should go for an arbitration process or pursue court proceedings instead. Always ask for legal advice and understand the scope of what you’re signing up for.