Arbitration is a method of resolving disputes, where an arbitrator, instead of a judge, makes the final decision. The definition of arbitration given by the American Arbitration Association is applicable in Ontario and other common law provinces. The definition states arbitration is:
“The submission of a dispute to one or more impartial persons for a final and binding decision. Through contractual provisions, the parties may control the range of issues to be resolved, the scope of the relief to be awarded and many of the procedural aspects of the process.”
After reaching an agreement to arbitrate, the parties execute an Arbitration Agreement, which specifies the Arbitrator’s jurisdiction, the issues that are subject to arbitration, as well as an outline of the process.
Arbitration awards are usually binding. That is, the parties agree beforehand to be bound by the decision to be made by another person, usually referred to as an arbitrator or arbitral tribunal (where there is more than one arbitrator), and sometimes called a third party neutral.
The parties to an arbitration agreement have wide latitude as to the arbitration agreement that will govern them.
If the parties agree, among other things, they have the option of:
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- introducing elements of informality;
- simplifying the procedure so that it is far removed from the requirements of the courtroom setting;
- permitting the matter to be presented through written arguments and documents without the attendance of witnesses;
- ensuring that the arbitrator’s award or decision is final and that there is no right to appeal to the courts in any circumstances.
Alternatively, the parties may, for example, agree that:
- the arbitration procedure will be more stringent than that found in the public court system;
- a panel of arbitrators and not just a single arbitrator will hear the case and render a decision; and
- either party, as of right, may appeal the arbitrator’s or panel’s award on any issue of fact or law or mixed fact or law.
Arbitration is appropriate in those cases where the parties all agree to submit their dispute to arbitration, rather than engage in an expensive lawsuit or court trial. Most likely these parties have decided that they cannot resolve the dispute among themselves, that outside conciliators or mediators will not assist them and they, therefore, wish some other person to impose a decision that will be binding upon them, whether or not they like the decision rendered.