ARBITRATION

Arbitration is the process by which two parties agree to submit a dispute they cannot settle on their own to a third party, or arbitrator, whose decision is final and binding on both sides. Disputing parties resort to arbitration when they have reached a point where the only alternative is a lawsuit or a strike. In some cases arbitration is required by law. Arbitration is common in disputes over construction contracts, landlord-tenant contracts, and even salary disagreements in professional sports. After evaluating the dispute, the arbitrator either sides with one of the parties or tries to find a solution that is fair to both. He may be appointed by the two parties or assigned by a court. The arbitrator may be a respected individual or panel of individuals or a professional arbitrator hired through organizations like the American Arbitration Association.

Arbitration proceedings differ from lawsuits. They are faster and cheaper, and arbitrators have greater flexibility than law courts because they do not have to assign "blame" to one of the parties. Arbitration proceedings are ideally suited to complex disputes where the arbitrator has specialized expertise in the subject matter of the dispute, and they enable the disagreeing parties to maintain greater privacy over the arbitration process.

Commercial or contract arbitration arose in medieval Europe to settle disputes when the law was no help because the disputing merchants lived in different political or legal systems. By the nineteenth century the United States had developed a voluntary arbitration system in which workers and owners freely submitted their labor disputes to an "umpire" for resolution. In 1926 the American Arbitration Association was established to create a trained pool of professional arbitrators. Nine years later, the National Labor Relations Act was passed, making it easier for workers to use arbitration to bargain collectively for better labor agreements. The need for quick resolution of labor disputes during World War II (1939–1945) increased the number of arbitrated labor disputes. The passage of the Arbitration Acts of 1947, 1970, and 1990 strengthened the process of arbitrating commercial disputes, made the process more uniform, and established procedures for resolving disputes with foreign companies. In 1960 the landmark "Steelworkers' Trilogy" Supreme Court case limited the role of the courts in overturning arbitration cases, paving the way for today's independent, legally binding arbitration decisions.

See also: Collective Bargaining, Strike