lawyers and judges.
Types of Arbitration Agreements
Parties can enter into either voluntary or involuntary arbitration. In voluntary arbitration, the disputing
parties have decided, of their own accord, to seek arbitration as a way to potentially settle their dispute.
Depending on the state’s laws and the nature of the dispute, disagreeing parties may have to attempt
arbitration before resorting to litigation; this requirement is known as involuntary arbitration because it is
forced upon them by an outside party.
Arbitration can be either binding or non-binding. In binding arbitration, the decision of the arbitrator(s) is
final, and except in rare circumstances, neither party can appeal the decision through the court system. In
non-binding arbitration, the arbitrator’s award can be thought of as a recommendation; it is only finalized if
both parties agree that it is an acceptable solution. This fact is why non-binding arbitration can be useful for
what the American Arbitration Association describes as “disputes where the parties may be too far apart in
their viewpoints to mediate or are in need of an objective evaluation of their respective positions.” Having a
neutral party assess the situation may help disputants to rethink and reassess their positions and reach a
future compromise.
Issues Covered by Arbitration Agreements
There are many instances in which arbitration agreements may prove helpful as a form of alternative dispute
resolution. While arbitration can be useful for resolving family law matters, such as divorce, custody, and child
support issues, in the domain of business law, it has three major applications:
•
Labor. Arbitration has often been used to resolve labor disputes through interest arbitration and
grievance arbitration. Interest arbitration addresses disagreements about the terms to be included in a
new contract, e.g., workers of a union want their break time increased from 15 to 25 minutes. In contrast,
grievance arbitration covers disputes about the implementation of existing agreements. In the example
previously given, if the workers felt they were being forced to work through their 15-minute break, they
might engage in this type of arbitration to resolve the matter.
•
Business Transactions. Whenever two parties conduct business transactions, there is potential for
misunderstandings and mistakes. Both business-to-business transactions and business-to-consumer
transactions can potentially be solved through arbitration. Any individual or business who is unhappy with
a business transaction can attempt arbitration. Jessica Simpson recently won an arbitration case in which
she disputed the release of a fitness video she had made because she felt the editor took too long to
release it.
•
Property Disputes. Business can have various types of property disputes. These might include
disagreements over physical property, e.g., deciding where one property ends and another begins, or
intellectual property, e.g., trade secrets, inventions, and artistic works.
Typically, civil disputes, as opposed to criminal matters, attempt to use arbitration as a means of dispute
resolution. While definitions can vary between municipalities, states, and countries, a civil matter is generally
one that is brought when on party has a grievance against another party and seeks monetary damages. In
contrast, in a criminal matter, a government pursues an individual or group for violating laws meant to
establish the best interests of the public. While the word crime often invokes the idea of violence, there are
many crimes, such as embezzlement, in which the harm caused is not physical, but rather monetary.
Chapter 2 Disputes and Dispute Settlement
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