What is Arbitration?

Arbitration is a form of alternative dispute resolution (“ADR”) in which the parties to a dispute select a neutral decision maker (the arbitrator). The arbitrator listens to the evidence and arguments presented by the parties, and then renders an enforceable, binding decision. The decision may or may not be appealable.

Why Consider Using Arbitration?

For many parties the court is not an attractive form of dispute resolution. Courts do offer a binding, enforceable decision. But this comes at a huge cost in time, money and emotional stress. Civil litigation typically gets bogged down in process. It applies the same, one-size-fits-all procedure to all cases, regardless of their size, complexity or the amount of money involved. As a result it absorbs huge amounts of time and money before getting to trial; and even greater amounts once the trial starts.

By way of contrast, arbitration offers the parties a chance to regain control of the litigation process. They select the decision maker. They determine the process to be used, deciding whether there will be discovery and, if so, how much. They can determine enforceable time lines. And they can agree to have a right of appeal to a court. In short, the parties to an arbitration create their own process and procedure, one that is suited to their needs and their pocketbook. Once agreeing on an arbitrator, they can also agree to let him or her make a decision based:

a. on written submissions alone; or

b. on written reports from witnesses, adjusters, experts and so on; or

c. on oral testimony at a hearing before arbitrator, with or without prior discovery; or

d. on procedures establishes under the legislation which governs arbitrations in the province in which it takes place.

Arbitrations are less expensive, and proceed much more quickly, than disputes which are resolved in the courts. The ability to fashion the process to be employed means that the parties are better able to control the cost (both in money, time and emotional stress) associated with litigation. Since the arbitrator deals only with the parties (and is not encumbered with a large court bureaucracy) he or she can hold a hearing and render a decision within weeks or months of an agreement to arbitrate; rather than the years commonly associated with civil litigation in the courts.

Another advantage to arbitration lies in privacy and confidentiality. Arbitrations are private affairs; the decisions are not published or released to the press (unless the parties agree otherwise).

How Does Arbitration Work?

The first step is for the parties to agree to arbitrate a dispute rather than go through the courts.

The agreement may already exist. Many contracts and insurance policies contain clauses that require the parties to submit any dispute over the contract to arbitration. These clauses will be enforced by the courts. The courts recognize the value of arbitration, and generally will not permit a party to a contractual arbitration clause to avoid arbitration.

If there is no pre-existing agreement to arbitrate, the parties can enter into an agreement to submit a dispute to arbitration. Each province usually has an Act that governs arbitrations generally (except in the case of labour arbitration, which often has its own legislative framework).

In Nova Scotia the Commercial Arbitration Act will generally govern. In New Brunswick, it is the Arbitration Act; in Prince Edward Island, the Arbitration Act; and in Newfoundland, the Arbitration Act.

A Sample Arbitration Agreement employed by Ad+Rem ADR Services Inc is part of this web site.

The parties then agree to appoint an arbitrator. Once appointed, the arbitrator will generally hold a meeting (by phone or in person) with the parties to determine what procedure the parties wish to employ–for example, will there be discovery and if so, of whom–and any appropriate time lines. The next step is the hearing itself, and, after that, the decision. The decision is final (unless the parties agree beforehand to a right of appeal to a court). It is binding. And it can be enforced in the same way that a court order can be.