Arbitration refers to one of several methods, collectively referred to as “alternative dispute resolution” (ADR), for resolving legal disputes other than through a formal court system. Arbitration is very similar to a trial in court, except that the claims and defenses are presented to a privately-retained neutral party (”arbitrator” or “arbiter”) rather than a judge or jury. After listening to summary arguments and considering all the evidence presented in a dispute, an arbitrator renders a decision tantamount to a court decision or judgment.
Since it is intended to substitute for a trial, formal arbitration is generally as binding as a court adjudication. Therefore, like it or not, a decision of an arbitrator may be appealed only under very narrow circumstances and criteria. (In fact, the arbitration agreement may designate that the decision is final and binding and cannot be appealed.) However, some forms of arbitration may be expressly designated as “non-binding.” In those circumstances, one may accept or reject the arbitration decision and continue with litigation in the courts.
Arbitration has become a preferred alternative favored by both courts and parties for resolving disputes. All 50 states acknowledge some form of arbitration for the resolution of certain disputes. A majority of states (48 as of 2002, excepting Georgia and Mississippi) have adopted the Uniform Arbitration Act (UAA) and/or its revised version, published in 2000, or substantially similar legislation. Washington, D. C. and Puerto Rico also have adopted versions of the Act.
The use of arbitration has greatly expanded in recent years, because of the fast resolution of disputes, and the relative consistency and near-uniformity in procedural requirements prescribed by the UAA. The arbitration process also affords the parties a degree of privacy for sensitive or personal matters. Health care providers and insurance companies almost universally favor arbitrations because of the opportunity to avoid the publicity of court trials and jury verdicts.