Arbitration is one of many ADR mechanisms through which two or more parties may obtain a final and binding resolution to their dispute by an expert and independent professional of their own choice.
For the arbitration process to be legally valid and ultimately binding, the parties must agree to using arbitration of their own free will and must signify their resolve to abide by and perform the award of the arbitrator.
About Procedure
While simpler than traditional litigation, the arbitration process may appear complex to the uninitiated. Most arbitration rules contain several dozen articles regulating the process from initiation to the delivery of the award to the parties. Between initiation and award, the process may not necessarily take place as smoothly as one may anticipate for a number of reasons unique to each case.
While most arbitration laws and rules allow parties to arbitrate unrepresented, they should seriously consider engaging expert counsel to guide them through the process. Mistakes made as a result of unfamiliarity with procedure and/or law can not easily be cured after an award is rendered. Not having been represented by legal counsel does not constitute a ground in and of itself to vacate an arbitral award
About modalities
Arbitration has two distinct modalities, that is, institutional and ad hoc.
Institutional arbitration occurs when the parties name an ADR provider in their agreement who administers the entire process in accordance with a set of rules.
Institutional arbitration is appropriate for parties not familiarized with arbitration in general or with arbitration practice and law in a given jurisdiction. The advantage of choosing a reputable ADR services provider resides in their expertise and knowledge of procedure and applicable law, and also in the fact that it appoints reputable, experienced and trained neutrals in accordance with a known set of guidelines or rules. The disadvantage is the cost of providing the service, which can be substantial depending on the nature of the dispute.
Ad hoc arbitration is administered by the arbitrator himself or through a secretary who performs bureaucratic duties directly under the supervision and responsibility of the named arbitrator.
Ad hoc arbitration is employed in some occasions by experienced corporations and counsel who trust a specific individual and therefore name him/her to hear a controversy and administer the case. By choosing ad hoc arbitration, parties eliminate the cost of having the dispute administered by an ADR service provider. Also, parties are able to choose suitable neutrals not necessarily affiliated with a particular case administering institution. The disadvantage occurs when the neutral, while an expert in a particular area of the law, is not a competent case administrator as well.
Additionally, arbitration may take place in equity or at law. Arbitration at law can only take place before a licensed, practicing attorney who must reason the award in accordance with the law. Equity arbitration allows any professional to act as an arbitrator, rendering an award based on trade/industry usage and practice.