Arbitration is a well-established and widely used means to end disputes. It is one of several kinds of Alternative Dispute Resolution, which provide parties to a controversy the ability to avoid costly and time-consuming litigation. Judicial Arbitration and Mediation Services (JAMS) is a leading organization in providing arbitration services.
Understanding Arbitration
Definition and Principles of Arbitration
Arbitration is a private dispute resolution process in which a neutral third party — the arbitrator — reviews evidence and arguments, then issues a binding decision called an award. The process is typically less formal, faster, and less expensive than a court trial, making it a popular choice in commercial contracts. The arbitrator’s award is final and enforceable, subject to very limited grounds for appeal.
Arbitration rests on three core principles: neutrality, confidentiality, and finality. Parties retain broad freedom to set the procedures, location, language, and governing law of the arbitration. The confidential nature of proceedings protects both parties from unwanted publicity, and arbitral awards are enforceable in court under the Federal Arbitration Act with minimal risk of reversal. For disputes involving both domestic and international parties, understanding these principles is essential before choosing between AAA and JAMS arbitration.
Different Types of Arbitration
Binding Arbitration
In binding arbitration, the decision of the arbitrator is final and binding on the parties involved in the dispute. The arbitrator’s decision, called an award, is enforceable by the courts, and there are very limited grounds for a party to challenge or appeal an arbitrator’s award.
Non-binding Arbitration
In non-binding arbitration, the arbitrator’s decision is advisory and not enforceable by the courts. If either party is not satisfied with the arbitrator’s decision, they can request a trial. However, the arbitrator’s decision can be used as a basis for settlement negotiations.
Voluntary Arbitration
Voluntary arbitration refers to cases where parties agree to resolve their dispute through arbitration. It is not compulsory, and parties have the freedom to choose arbitration over litigation.
Compulsory Arbitration
In compulsory arbitration, the parties are required to arbitrate certain disputes. This requirement can arise from a statute or contract term that mandates the arbitration of disputes.
Commercial Arbitration
Commercial arbitration is a means of resolving disputes between parties engaged in business transactions. It is a form of arbitration commonly used in the resolution of international business disputes. When drafting a commercial contract, one of the first structural decisions is which forum to select — a comparison of the legal impacts of choosing AAA vs. JAMS can inform that choice.
International Arbitration
International arbitration is a leading method for resolving disputes arising from international commercial agreements and other international relationships. The International Arbitration process, as administered by organizations such as JAMS, provides a forum for the resolution of disputes in a less formal environment than court.
Key Components of Arbitration
The Arbitration Agreement
The arbitration agreement is the contract between the parties to submit their disputes to arbitration. It is a significant and foundational document that sets the framework for the arbitration process. One structural consideration often addressed in the agreement is whether to use a sole arbitrator or a three-member panel — see picking one vs. three arbitrators for guidance on that decision.
The Arbitration Clause
The arbitration clause, typically found in a contract between parties, is a provision where the parties agree to resolve their disputes through arbitration rather than litigation. When drafting this clause, it is important to consider whether it conflicts with any choice-of-law provision in the same agreement — conflicts between arbitration and choice-of-law terms can create enforcement problems if not resolved at drafting.
Rules of Evidence in Arbitration
Unlike court litigation, arbitration typically does not follow the formal rules of evidence used in court trials. Instead, arbitrators have discretion to determine the rules of evidence to apply, which can lead to a more efficient and cost-effective process.
Confidentiality in Arbitration
One of the advantages of arbitration over court litigation is the confidentiality of the proceedings. Unlike court trials, which are public, arbitration proceedings and decisions are typically confidential.
JAMS and Its Role in Arbitration
JAMS: An Overview
JAMS, short for Judicial Arbitration and Mediation Services, is one of the leading providers of alternative dispute resolution services globally, including arbitration and mediation. Founded in 1979, JAMS has a panel of neutrals, composed of retired judges and attorneys with substantial experience.
JAMS Comprehensive Arbitration Rules and Procedures
The JAMS Comprehensive Arbitration Rules and Procedures govern the conduct of arbitral proceedings administered by JAMS. They cover the entire arbitration process, including the commencement of proceedings, the appointment of the arbitrator, preliminary procedures, the hearing, and the award.
Role of JAMS Neutral
A JAMS neutral is a professional arbitrator or mediator who conducts the dispute resolution process. They play a critical role in ensuring the arbitration process is conducted efficiently and fairly.
JAMS Mediation Versus Arbitration
Mediation and arbitration are fundamentally different processes, even when both are offered by JAMS. In mediation, a neutral third party facilitates negotiation between disputing parties but has no authority to impose a decision — settlement requires mutual agreement. In arbitration, the arbitrator hears arguments and evidence from both sides and then issues a binding award. Choosing the right process depends on whether the parties want control over the outcome or a definitive resolution.
Understanding Dispute Resolution
Alternative Dispute Resolution: A Closer Look
Alternative Dispute Resolution (ADR) is an umbrella term for processes, other than judicial determination, in which an impartial person assists those in a dispute to resolve the issues between them. ADR is commonly used as a means to avoid the need for a court trial, which can be a lengthy and expensive process. Business owners selecting an ADR forum should also consider choosing between AAA, JAMS, and private arbitration — each option has distinct cost, speed, and procedural tradeoffs.
Settlement Negotiation
Settlement negotiation is a process where disputing parties reach an agreement or compromise to avoid a trial. The process can be done directly by parties or with the assistance of a third-party neutral, such as a mediator.
Role of Third Party Neutral in Dispute Resolution
A third-party neutral plays a critical role in dispute resolution processes such as arbitration and mediation. They facilitate communication, promote understanding, and help the parties reach a mutually agreeable resolution.
Federal and International Context
The Federal Arbitration Act: A Primer
The Federal Arbitration Act (FAA) is a statute of the United States that provides for the enforcement of arbitration agreements in disputes involving commerce. It applies to any arbitration agreement within the jurisdiction of the United States, whether the dispute is domestic or international.
JAMS International Arbitration: Procedures and Importance
JAMS offers comprehensive dispute resolution services, including international arbitration. Their neutrals are skilled in managing the complex issues that often arise in international disputes. The procedures for international arbitration under JAMS are similar to their domestic procedures but have some unique features that account for the international nature of the dispute. A related drafting consideration is the distinction between arbitration seat and venue, which can have significant legal consequences in international matters.
Enforcement of Arbitration Awards
Process of Enforcement
Once an arbitrator issues an award, the prevailing party may seek to enforce it in court. The process of enforcement varies depending on whether the award is domestic or international, and may require separate court proceedings. For Minnesota businesses, a detailed overview of arbitration award enforcement under Minnesota law explains how state courts handle confirmation, vacation, and modification of awards.
Challenges in Enforcement
While arbitration awards are generally enforceable, challenges may arise during the enforcement process. A party may attempt to resist enforcement on several grounds, such as alleging that the arbitrator exceeded their authority or that the award violates public policy.
Controversies and Critiques of Arbitration
Mandatory Arbitration: Pros and Cons
Mandatory arbitration, where parties are required to arbitrate disputes, often as a result of a pre-dispute arbitration clause, has been a subject of controversy. Critics argue it can disadvantage weaker parties, while proponents contend it provides a quicker, cheaper alternative to court litigation.
Transparency and Fairness Concerns in Arbitration
Concerns have been raised about the transparency and fairness of arbitration. Critics argue that because arbitration is private and confidential, it lacks the transparency of court trials. Further, they assert that arbitration may favor corporations over individuals because corporations are repeat players that provide repeat business for arbitrators.
What is JAMS arbitration?
JAMS (Judicial Arbitration and Mediation Services) is one of the largest private alternative dispute resolution providers in the world, founded in 1979. JAMS administers arbitration proceedings using its own rules and a panel of experienced neutrals — retired judges and senior attorneys. Parties select JAMS by naming it in their arbitration clause or by mutual agreement after a dispute arises.
Is a JAMS arbitration award final and binding?
Yes. In binding arbitration, the arbitrator’s award is final and enforceable by the courts. Grounds to challenge or appeal an award are very limited — courts generally will not second-guess an arbitrator’s legal or factual conclusions. The Federal Arbitration Act governs enforcement of most commercial arbitration awards in the United States.
What is the difference between JAMS mediation and JAMS arbitration?
Mediation and arbitration are fundamentally different processes. In JAMS mediation, a neutral facilitates settlement discussions but has no authority to impose a decision — the parties must agree. In JAMS arbitration, the arbitrator hears evidence and arguments and then issues a binding decision called an award.
What rules govern JAMS arbitration proceedings?
JAMS publishes the Comprehensive Arbitration Rules and Procedures, which govern the full lifecycle of a JAMS arbitration: commencement, arbitrator appointment, preliminary procedures, hearings, and the award. Parties may also agree to use the Streamlined Arbitration Rules for smaller, less complex disputes.
What are the main criticisms of mandatory arbitration clauses?
Critics argue that mandatory pre-dispute arbitration clauses can disadvantage weaker parties — typically employees or consumers — who may not fully understand they are waiving their right to a jury trial. Additional concerns include limited transparency, the potential for arbitrator bias toward repeat-player corporations, and restricted appellate review.
