According to FindLaw.com, arbitration is a process of private justice, not a court proceeding. Let’s suppose two parties have a contract and one party says the other party broke the contract. Both parties could go court, of course, but let’s say they don’t want a public court proceeding. Do they have any other option? They could ask a third party to decide who is right. This third party can act as a private judge. In their role as a private judge, the third party is an arbitrator. In such a case, we talk about an arbitration agreement. Instead of going to court, the two parties are arbitrated by the third one. During the arbitration, the third party provides evidence why they think they are right. At the end of the arbitration, one of the two parties involved in the dispute will win the clause. Generally speaking, in the US, the party who loses the arbitration clause will have to pay. But what if they refuse to pay? Now probably they will have to go to court. The court will most probably enforce the arbitration award.
Arbitration clauses are clauses that are most commonly found in nursing home and different types of contracts, which are to resolve disputes for things such as physical or sexual abuse that happened to your loved one in the nursing home. They are designed to protect the nursing home, not you, typically. They involve you giving up your right to a jury trial, they oftentimes limit the types of damages that you can recover, and they oftentimes require you to have an arbitration in front of a panel of people who unfortunately get a lot of work from the nursing home ministry who will then be interested in helping them in giving a favourable result, and not you.
Today, it is commonplace to find arbitration clauses in contracts or to hear of companies or individuals who are being strong-armed into arbitration by those they wish to make claims against.
While there is a time and a place for settling disputes outside of the courtrooms, legal experts agree it is important that, when attempting to resolve any serious issue, legal advice is taken before any such arbitration discussions begin.
In August 2017, a case heard in Washington by the US Supreme court refused to a proposal from the electronic giant Samsung, who were putting pressure on two customers – trying to get the customers to arbitrate the class-action lawsuit they had brought against the South Korean company.
The justices upheld the ruling made by a lower court which stated that customers buying the Galaxy smartphone, produced by Samsung, were not tied by a provision set out in the smartphone’s warranty dictating the arbitration of complaints from customers.
In short, the arbitration clause in Samsung’s warranty was deemed to not be legally binding and so the individuals concerned, Daniel Norcia and Hoai Dang won their right to have the claim heard in court.
The two claimants had filed complaints regarding the products performance and resale value and had pleaded that they had no knowledge of the warranty clause, as it was buried deep within the warranty booklet.
The case acts as a wider reflection of how arbitration is being touted as a “quick win” by many individuals and companies who are not wishing to go to court in order to settle disputes. And this quick win resolution is not just confined to disputes related to business or commerce.
Disputes between family members, such as divorce settlements are just as likely to be the focus of calls for arbitration. Often, when a couple reach a stalemate in divorce settlement negotiations, arbitration can be a reasonable solution, but only once both parties have sought expert legal counsel and, therefore, stand in positions that are equitable.
Arbitration that goes ahead without both parties being on an equal legal footing or without transparency, no matter what or who the dispute concerns, is less likely to conclude in a way that is profoundly just.
“We believe that big nations should not bully smaller nations and that the sovereignty of nations must be respected. And we have long urged that disputes be resolved peacefully, including through mechanisms like international arbitration.” Barack Obama