Arbitration is a faster, simpler and less expensive way to resolve conflict than the traditional court system. There are different situations in which the parties might end up choosing arbitration as the way to resolve their issues. Sometimes when a conflict arises, the parties will both agree that they would rather not go to court and come to a solution in a less complicated manner (voluntary arbitration). In the majority of situations, the parties signed a contract with an arbitration clause stating that in case of conflict the parties have to go through the arbitration system and give up their right to sue in Court (mandatory arbitration).
Arbitration clauses are commonly found in different types of contracts such as commercial contracts and employment contracts. They may vary a lot and the best advice we can give is to make sure to understand the clause, and be sure that the clause doesn’t create a great disadvantage in case of a conflict. We suggest you that you really try to anticipate what type of issue could arise in order to make the best decision. Indeed, when signing a contract with an arbitration clause the parties give up their right to a fair trial in Court. In some commercial contracts, you may not have a choice and will have to accept the clause if you want to sign the contact. However, if you are buying a house for example and the clause doesn’t satisfy you, you might be able to change it or even remove it. In many cases, we recommend mediation and recommend against adopting an arbitration clause.
Some clauses will be binding, meaning that the decision made by the arbitrator is final and cannot be reviewed by a court. Other clauses are non-binding, meaning that the parties will not have to comply with the decision and can possible pursue court litigation. In that last scenario arbitration is more a preliminary step in the conflict resolution and if the parties aren’t satisfied, they will be able to find another way of resolution or pursue court litigation.