Arbitration involves the resolution of disputes between parties on a private and confidential basis through the appointment of an arbitrator. The arbitrator is an independent, neutral, third party who hears and considers the merits of the dispute and renders a binding decision called an “Award”.
Arbitration is similar to litigation in some respects, in that it involves “adjudication” as opposed to “settlement”. However, in arbitration, the parties can create their own judicial forum tailored to their own needs and choose a specific arbitrator with experience in a certain area (labour, insurance, environmental, contracts, etc). The parties can also decide on how formal or informal they want the process to be. The rules of evidence can be relaxed or enforced depending on the topic and the preference of the parties.
Arbitration is generally commenced by agreement between the parties. However, increasingly contracts specify that if a dispute occurs between the parties it “shall” or “may” be submitted to arbitration for resolution. Often parties will include an arbitration clause in Minutes of Settlement or Agreements, allowing future disputes to be arbitrated, thus avoiding the cost and time associated with litigation.
The “Arbitration Act” governs the arbitration process in Alberta. Once submitted to arbitration, courts will generally not interfere unless an arbitrator exceeds his jurisdiction or renders an award that is “patently unreasonable”.
Arbitration offers an effective and timely alternative to litigation. Because arbitrators must hear and weigh evidence and/or interpret a contract, statute or regulation, by necessity most arbitrators are lawyers or retired judges.
Arbitration is more formal than mediation or collaborative law but much less formal and more timely and cost effective than litigation.
Advantages of Arbitration
- The process is timely and cost effective compared to litigation.
- An arbitration award can be enforced by the Court of Queen’s Bench for non-compliance.
- Proceedings are private and not subject to public or media scrutiny.
- Arbitration can proceed quickly- usually with a few months. Litigation takes many months, if not years, to complete.
- The process is more economical than formal litigation.
- Abritation leads to a conclusive decision. Mediation and negotiation will sometimes fail to reach a settlement or agreement. The process has finality, allowing parties to move forward with a binding award.
Disadvantages of Arbitration
- An award, similar to a court judgement, is imposed upon the parties. The parties do not control the process to the extent they do in mediation or collaborative law.
- Increased expense, as arbitrators generally charge more than mediators.
- Because the process is binding, parties often choose to retain counsel which further increases the cost.
- Because the award is binding, there is frequently “winner” and a “loser”; Mediation and collaborative law attempt to arrive at a “win-win” solution.