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What is arbitration?

Hello and welcome!

It's Tamsen Horton from winner of this year's National Association of Lash Artists innovative product of the year and this is your lashing legally flash briefing for Monday, June 3, 2019.

As you are going about your day today. Keep in mind that all of your business decisions have a legal impact and you want them to be positive.

And now time to get our legal on ...

It might sound like a term really only found in a union dispute a few decades ago, but it is more and more common in the business world. You'll run across it in employment contracts, credit card agreements, and retail contracts all the time, so it's good to know what it means and how arbitration works. In particular, you may have seen a mandatory arbitration clause in a contract.

What is the purpose of arbitration?
It is an alternative to a court proceeding.

Arbitration is the process of bringing a business dispute before a disinterested third party for resolution. The third party, an arbitrator, hears the evidence presented by both sides and makes a decision (much like a judge would). Sometimes that decision is binding on the parties.

Arbitration is a form of alternative dispute resolution (ADR), used in place of litigation (going to court) in the hope of settling a dispute without the cost and time of going to court. Litigation is a court-based process that involves a decision that is binding on both parties and a process of appealing the decision.

Arbitration is often confused with mediation, which is an informal process of bringing in a third party who goes between the disputing parties to help them settle a dispute. The mediation process is not binding on the parties, and the mediator does not hear evidence. Think of a mediator as a go-between who doesn't have the emotions of the people involved.

The mediator meets with the parties for discussion. The mediator tries to bring the parties together by helping them see the strengths and weaknesses of what they want the resolution to be. Litigation, arbitration, and mediation are all involved in settling business disputes.

What is an arbitration clause?
Typically, arbitration begins when two parties agree to settle their dispute through arbitration in their contract or written agreement. A typical arbitration clause in a contract might look like this (from the American Arbitration Association):

Any controversy or claim arising out of or relating to this contract, or its breach, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction.

What does that all really mean?
The people to the contract are agreeing to put their disagreement to the jurisdiction and discretion of the arbitrator and use the rules of arbitration to reach the resolution.

How the arbitration process work?
According to the American Arbitration Association (AAA), here is the general process for arbitration.

Filing and Initiation: An arbitration case begins when one party submits a Demand for Arbitration to the AAA. The other party (the respondent) is notified by the AAA and a deadline is set for a response.

Arbitrator Selection: The AAA works with the parties to identify and select an arbitration based on the criteria determined by the parties.

Preliminary Hearing: The arbitrator conducts a preliminary hearing with the parties, to discuss the issues in the case and procedural matters, such as witnesses, depositions, sharing information, and other matters.

Information Exchange and Preparation: The parties then prepare for presentations and exchange information.

Hearings: At the hearing, both parties may present testimony and evidence to the arbitrator. Unless the case is very complex, this is usually the only hearing before the arbitrator.

Post-Hearing Submissions: After the hearing, both parties may present additional documentation, as allowed by the arbitrator.

The Award: Finally, the arbitrator closes the record on the case and issues a decision, including an award, if applicable.

Do I Need a Lawyer for Arbitration?
It's a common myth that lawyers aren't allowed in the arbitration process. Anyone is entitled to have an attorney but it isn't required. You could have an attorney advise you outside of the actual arbitration setting. One of the benefits of arbitration is avoiding the cost of going to court, which includes the cost of hiring an attorney.

What Does Arbitration Cost?
Arbitration costs vary based on the complexity and detail of the case and the level of expertise you want from the arbitrator. Typically the cost of arbitration includes:

  • A filing fee with a court
  • Administrative costs, for paperwork, etc.
  • Cost of the arbitrator at an hourly or daily rate.

That's it for today's flash briefing. If you aren't yet a member of my free online community head on over to and join us. I have a free legal masterclass that dives into various topics designed to help you protect what you are working so hard to build.

Have a burning question for me that you'd like answered in a flash briefing, then click to Ask Tamsen above.

Have a great day and I'll see you tomorrow with a brand-new lashing legally flash briefing.

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