First Principles - Chapter One - Law and Practice of United States Arbitration - Seventh Edition
1. A Definition of Arbitration
Arbitration is a private and generally informal trial framework under which parties can adjudicate disputes. It is an extrajudicial mechanism. It functions as an alternative to conventional judicial litigation. It produces binding determinations through less expensive, more efficient, expert, and reasonably fair proceedings. Although it can engender settlements, arbitration is not a framework for achieving dispute resolution through party agreement. Arbitration is neither negotiation nor mediation. By agreeing to arbitrate, the parties confer legal authority on the arbitrators to adjudicate their disputes, i.e., to render a final disposition on the matters submitted that can then be enforced if necessary through coercive legal means. Party agreement sets the process in motion, but it does not (necessarily) dictate the procedure nor (certainly) the outcome. Once the parties entrust the arbitral tribunal with the authority to rule, they—subject to a possible intervening party settlement during the proceedings—relinquish control of the trial, the dispute, and its resolution to the arbitrators and—more incidentally—the administering arbitral institution.
The recourse to arbitration is ordinarily consensual. Despite their unilateral character, adhesive contracts for arbitration are valid and enforceable —unless a court determines that the arbitral contract is unconscionable. In their contract, the parties agree to submit existing or prospective disputes to arbitration. The agreement to arbitrate is the centerpiece of the process—both in terms of legal doctrine and from a practical perspective. The parties have the freedom—the legal right—to engage in arbitration and to make specific provision for the implementation and operation of the arbitral proceeding. By entering into an arbitration contract, the parties voluntarily abandon their right to judicial relief and, in effect, create a private system of adjudication that presumably is better adapted to their transactional needs.