The Common Law
What is arbitration?
By Luke Ellis, Fri., Feb. 25, 2005
Arbitration is a legal alternative to litigation that allows two parties engaged in a dispute to resolve the issue without going to court. Arbitrations are commonly used in business and labor disputes, mainly because arbitrations usually take only a fraction of the time and money needed to litigate the same issue before a court.
In an arbitration, each party gets to present its respective position to a neutral third party, called the arbitrator. The arbitrator conducts the contested hearing and then, like a judge, makes a legally binding decision. This is because both parties agree to recognize the arbitrator as a legal authority capable of making a legally binding decision. The parties may, however, limit the arbitrator's decision-making power based on an agreement. For example, the parties could agree to cap the amount of monetary damages that the arbitrator can award.
Most arbitration proceedings loosely resemble a court hearing. Arbitrators are typically given more leeway than judges, which can allow them to accept evidence that might not be admissible in court, question witnesses, and decide appropriate remedies.
The arbitrator's final decision can be appealed to a court. However, as a general rule, the reviewing court will not change the arbitrator's ruling. Assuming the arbitrator acted within his or her authority and there is no evidence of wrongdoing or misconduct, the court will allow the arbitrator's decision to be final.
Be sure to review future contracts for an arbitration provision and give consideration to whether arbitration is something that will benefit you in the event a dispute arises.
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Marrs, Ellis & Hodge LLP, www.mehlaw.com.
The material in this column is for informational purposes only. It does not constitute, nor is it a substitute for, legal advice. For advice on your specific facts and circumstances, consult a licensed attorney. You may wish to contact the Lawyer Referral Service of Central Texas, a non-profit public service of the Austin Bar Association, at 512-472-8303 or www.austinlrs.com.
