Voluntary arbitration is a method of resolving disputes wherein both parties involved in a disagreement mutually agree to submit their dispute to an impartial third party, known as an arbitrator. The decision made by the arbitrator is generally binding. Unlike compulsory arbitration, voluntary arbitration is not mandated by a contract or a court order but is instead chosen voluntarily by the disputing parties.
Key Characteristics
Mutual Agreement
One of the primary features of voluntary arbitration is that it is initiated by the consensus of both parties involved. There is no external force or regulation compelling the parties to arbitrate.
Binding Decision
While the process is voluntary, the decision made by the arbitrator is usually binding. This means that the parties agree beforehand to abide by the arbitrator’s decision.
Impartial Arbitrator
The arbitrator is typically an expert in the field related to the dispute and is chosen to be impartial and unbiased.
Types of Voluntary Arbitration
Ad Hoc Arbitration
This type occurs when the parties arrange the arbitration themselves without the involvement of an institution. They select the arbitrator, determine the rules, and manage other procedural aspects.
Institutional Arbitration
Here, the arbitration is administered by an established arbitration institution, such as the American Arbitration Association (AAA) or the International Chamber of Commerce (ICC), which provide a framework and support for the arbitration process.
Special Considerations
Confidentiality
Voluntary arbitration proceedings are usually private, and the details of the dispute, including the award, can be kept confidential.
Flexibility
The arbitrators and the parties have significant flexibility in determining the rules and procedures that will govern the arbitration process.
Examples
Commercial Disputes
Businesses often use voluntary arbitration to resolve disputes related to contracts, partnerships, and other commercial agreements to avoid the lengthy and public litigation process.
Employment Disputes
Employers and employees may choose voluntary arbitration to address workplace disputes in a more informal setting than a court.
Historical Context
Arbitration as a dispute resolution mechanism has ancient roots, tracing back to early civilizations such as Ancient Greece and Rome, where it was used to settle conflicts outside of formal judicial systems. In modern legal systems, voluntary arbitration has gained prominence for its efficiency and adaptability in resolving complex disputes.
Applicability
Business and Commerce
In commercial settings, voluntary arbitration is frequently used due to its efficiency, cost-effectiveness, and ability to manage disputes discreetly.
International Trade
Voluntary arbitration is widely accepted in international trade to resolve disputes involving different legal jurisdictions.
Comparisons
Voluntary vs. Compulsory Arbitration
- Voluntary Arbitration: Initiated by the agreement of both parties, flexible, and confidential.
- Compulsory Arbitration: Mandated by a contract, statute, or court, often less flexible and may not guarantee confidentiality.
Arbitration vs. Mediation
- Arbitration: Involves a binding decision by an impartial arbitrator.
- Mediation: Involves a neutral mediator who assists the parties in reaching a mutually agreeable solution, but the decision is not binding.
Related Terms
- Arbitration Agreement: A written agreement where parties consent to resolve disputes through arbitration.
- Arbitrator: The neutral third-party tasked with resolving the dispute.
- Award: The final decision of the arbitrator, which can be binding or non-binding.
Frequently Asked Questions
Is the decision of voluntary arbitration legally binding?
Yes, unless stated otherwise, the decision reached in voluntary arbitration is binding on both parties.
Can parties appeal an arbitration decision?
Typically, the grounds for appealing an arbitration decision are very limited, often restricted to instances of arbitrator misconduct or procedural errors.
How is an arbitrator selected?
Parties can mutually select an arbitrator, often from a professional organization or an arbitration institution.
References
- American Arbitration Association (AAA) – www.adr.org
- International Chamber of Commerce (ICC) – www.iccwbo.org
- Born, Gary B. “International Commercial Arbitration.” Kluwer Law International, 2014.
Summary
Voluntary arbitration is a self-selected and mutually agreed upon process of dispute resolution wherein parties decide to submit their conflict to an impartial arbitrator whose decision is usually binding. It is valued for its flexibility, confidentiality, and efficiency in resolving a wide array of disputes ranging from commercial to employment issues. The practice has historical roots and continues to be a preferred method in modern legal and business environments.
