Definition of arbitration
< Middle English arbitracion < Old French arbitration < Latin arbitratio < arbitrari ("to arbitrate, judge"); see arbitrate.
arbitration (countable and uncountable; plural arbitrations)
- the act or process of arbitrating
- a process through which two or more parties use an arbitrator or arbiter in order to resolve a dispute
- In general, a form of justice where both parties designate a person whose ruling they will accept formally. More specifically in Market Anarchist (market anarchy) theory, arbitration designates the process by which two agencies pre-negotiate a set of common rules in anticipation of cases where a customer from each agency is involved in a dispute.
- arbitration in Webster's Revised Unabridged Dictionary, G. & C. Merriam, 1913
- arbitration in The Century Dictionary, The Century Co., New York, 1911
Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides. Other forms of ADR include mediation (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. It is more helpful, however, simply to classify arbitration as a form of binding dispute resolution, equivalent to litigation in the courts, and entirely distinct from the other forms of dispute resolution, such as negotiation, mediation, or determinations by experts, which are usually non-binding. Arbitration is most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is far more controversial in consumer and employment matters, where arbitration is not voluntary but is instead imposed on consumers or employees through fine-print contracts, denying individuals of their right to access the courts.
Arbitration can be either voluntary or mandatory and can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable.
Sources of law
States regulate arbitration through a variety of laws. The main body of law applicable to arbitration is normally contained either in the national Private International Law Act (as is the case in Switzerland) or in a separate law on arbitration (as is the case in England). In addition to this, a number of national procedural laws may also contain provisions relating to arbitration.
By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are:
- The Geneva Protocol of 1923
- The Geneva Convention of 1927
- The European Convention of 1961
- The Washington Convention of 1965 (governing settlement of international investment disputes)
- The UNCITRAL Model Law (providing a model for a national law of arbitration)
- The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration)
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