Arbitration is a form of alternate dispute resolution, and is an informal proceeding which, as it pertains to administrative agency law, is the preferred method of conflict resolution. It occurs outside the courts and is presided over by an arbitrator, or unbiased third party. It is a settlement technique in which the arbitrator reviews the case and imposes a decision that is legally binding When parties are unable to negotiate an agreement, they enter into arbitration. Arbitration can be voluntary and involuntary, and the decisions are binding. In a voluntary arbitration hearing, the parties agree on procedures that may be formal or informal discussions, negotiations, hearings, or the options of trial-like discovery and sworn witnesses. In mandatory arbitration, the agency imposes the procedures on the parties and the resultant resolution. (1) It is not known exactly when formal non-judicial arbitration first began but it can be said with some certainty that arbitration, as a way of resolving disputes predates formal courts. Records from ancient Egypt attest to its use especially with high priests and their interaction with the public. Arbitration was popular both in ancient Greece and in Rome. Under English law, the first law on arbitration was the Arbitration Act 1697, but when it was passed arbitration was already common. The first recorded judicial decision relating to arbitration was in England in 1610. The noted Elizabethan English legal scholar Sir Edward Coke refers to an earlier decision dating from the reign of Edward IV (which ended in 1483). Early arbitrations at common law suffered from the fatal weakness that either party to the dispute could withdraw the arbitrator's mandate right up until the delivery of the award if things appeared to be going against them (this was rectified in the 1697 Act). The Jay Treaty of 1794 between Britain and the United States sent unresolved issues regarding debts and boundaries to arbitration, which took 7 years and proved successful. In the first part of the twentieth century, many countries (France and the United States being good examples) began to pass laws sanctioning and even promoting the use of private adjudication as an alternative to what was perceived to be inefficient court systems. The growth of international trade however, brought greater sophistication to a process that had previously been largely ad hoc in relation to disputes between merchants resolved under the auspices of the lex mercatoria. As trade grew, so did the practice of arbitration, eventually leading to the creation of a variant now known as international arbitration, as a means for resolving disputes under international commercial contracts. In the United States, the so-called "forced arbitration" or mandatory binding arbitration, has recently been strongly criticized by Public Citizen, a Washington-based public interest advocacy group, which points out a tendency of arbitrators to rule against consumers and in favor of corporations or institutions. In theory, arbitration is a consensual process; a party cannot be forced to arbitrate a dispute unless he agrees to do so. In practice, however, many fine-print arbitration agreements are inserted in situations in which consumers and employees have no bargaining power. Moreover, arbitration clauses are frequently placed within sealed users' manuals within products, within lengthy click-through agreements on websites, and in other contexts in which meaningful consent is not realistic. Such agreements are generally divided into two types:
agreements which provide that, if a dispute should arise, it will be resolved by arbitration. These will generally be normal contracts, but they contain an arbitration clause.
agreements which are signed after a dispute has arisen, agreeing that the dispute should be resolved by arbitration (sometimes called a "submission agreement") The former is the far more prevalent type of arbitration agreement. Sometimes,...
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