In society today, most people have encountered and agreed to an arbitration clause. Arbitration clauses are routinely used in medical agreements, lease agreements, business agreements, and the list goes on and on.
Arbitration is a well-established and widely used means to end disputes. The popularity for the use of arbitration clauses came about due to the increase in time and costs involved with traditional litigation. Arbitration takes place outside the courtroom before an impartial third-party selected by the parties. The parties agree when entering into an agreement if the arbitration will be binding or not. If the arbitration is binding, then the arbitrator (or panel’s) decision will be final, and courts will rarely overturn it.
There are many different types of arbitration tribunals that can be utilized when arbitrating a dispute. Some of the more well-known are:
- American Arbitration Association – this organization has been around since 1926 and is a global provider of alternative dispute resolution services.
- JAMS – this organization was founded in 1979, and is a global provider of alternative dispute resolution services.
The arbitration process is also utilized by many industries such as the Securities and Exchange Commission. The Financial Industry Regulatory Authority (FINRA) is a private corporation that acts as a self-regulatory organization which regulates member brokerage firms and exchange markets. Indeed, even if you are an investor and have a claim against your broker, you may be required to go through FINRA’s arbitration process because it is likely you agreed to arbitration when you opened an account with the brokerage firm.
In California even when a lawsuit is filed, your case could end up in arbitration. State courts with increasingly crowded calendars often recommend alternative dispute resolution (ADR). There has also been pressure from the Legislature encouraging voluntary private ADR and requiring litigants to participate in appropriate court-administered ADR programs. Courts must make available to plaintiff, at the time of filing the complaint in all general civil cases, an “ADR information package” that describes advantages and disadvantages of ADR, includes information about available programs, and contains a form that parties may use to stipulate to an ADR process.
It is increasingly likely that the use of arbitration, both voluntary and mandatory, in all areas in which disputes may arise will continue to grow.