Originally from Law and Practice of Arbitration - 4th Edition

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1. Introduction

Arbitration is a private and generally informal trial procedure for the adjudication of disputes.1 It is an extrajudicial process. It functions as an alternative to conventional litigation. It yields binding determinations through less expensive, more efficient, expert, and fair proceedings. Although it can engender settlements, arbitration is not a means of achieving dispute resolution through party agreement. Arbitration is neither negotiation nor mediation.2 By agreeing to arbitrate, the parties confer full legal authority on the arbitrators to adjudicate their disputes, i.e., to render a final disposition on the matters submitted that can be enforced through coercive legal means. Party agreement sets the process in motion, but it does not dictate (necessarily) the procedure nor (certainly) the outcome. Once the parties entrust the arbitral tribunal with the authority to rule, they—subject to a possible intervening settlement—relinquish control of the proceedings, the dispute, and its resolution to the arbitrators and—to a lesser extent—the administering arbitral institution.

The recourse to arbitration is ordinarily consensual. Despite their unilateral character, adhesive contracts for arbitration are valid and enforceable3—unless a court determines the provision to be unconscionable. In their agreement, 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 vantage point. The parties have the freedom—the legal right—to engage in arbitration and to make specific provisions for the implementation and operation of their arbitration. 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.