Not all legal disputes are resolved through the courts. Some disputes are resolved through arbitration. In an arbitration, the dispute is resolved by a neutral third party usually selected by the parties themselves. Arbitrators can be individuals chosen by the parties because they have unique expertise about the issues in dispute or because they are familiar with the parties’ circumstances.
They may also be selected from rosters maintained by dispute resolution services. The steps and processes involved in arranging and conducting the arbitration can, within limits, be customized by the parties to fit the nature of the dispute. The limits to customization are defined in provincial and federal legislation. Unless there is a clear agreement between the parties to vary or exclude a requirement of that legislation, the rules set out in the legislation will apply.
The process of resolving a particular dispute is often defined in a negotiated arbitration agreement. The parties can agree to customize the process in many ways, including:
- By creating a less formal process than would occur at court;
- By simplifying and streamlining the procedures that characterize the civil litigation system;
- By agreeing to resolve the dispute through written submissions rather than an oral in-person hearing with witnesses;
- By agreeing that the arbitrator’s decision will be final and not subject to appeal by a disappointed party; and
- By determining in advance who will be responsible for the costs of arbitration, including any legal fees and the fees charged by the arbitrator.
Alternatively, the parties might agree that:
- Certain processes should be more stringent than in the court system, depending on the unique circumstances of the dispute;
- A panel of arbitrators would determine the dispute rather than a single arbitrator;
- Before making a decision on the case, the arbitrator would attempt to help the parties reach a settlement by acting as a mediator; or
- An arbitrator’s factual decisions, legal decisions, or decisions of mixed fact and law can be appealed.
The parties may also define the scope of the arbitrator’s authority in deciding how to resolve the dispute. Depending on the nature of the dispute, the parties could agree that an arbitrator: could award damages, or not; could reinstate an employee to employment with or without compensation; or could amend or not be permitted to amend the parties’ contract. These are just examples of the potential scope of an arbitrator’s authority. Every dispute will be unique.
There are some fundamental requirements of the arbitration legislation that cannot be skipped or customized by the parties. For example, Ontario’s Arbitration Act, 1991 requires that every arbitration be structured to ensure equality and fairness. Each party must receive an opportunity to present their case and to respond to the opposing case. An agreement to conduct an unfair proceeding is not permitted. Arbitrators themselves have significant freedom to control proceedings. An arbitrator’s flexibility and authority to control the process can be limited by the parties’ arbitration agreement, any applicable legislation, and the principles of fairness and equality.
Arbitration procedures are particularly prominent in the unionized employment environment. Employees who are represented by a union and have disputes about the terms and conditions of their employment almost always have to pursue those issues through a grievance procedure defined in the collective agreement. The grievance procedure will invariably include an arbitration stage to determine disputes the employer and union cannot resolve themselves. These labour arbitrations are subject to particular requirements and rules that are often defined in legislation. Anyone involved in the arbitration of an employment-related dispute should review their collective agreement carefully, and speak to their union representative or a lawyer familiar with labour relations issues.
Unique considerations also apply to the arbitration of family law disputes. Anyone involved in a family law dispute relating to a marriage or similar relationship, children or property should consider seeking legal advice before entering into any dispute resolution process.
Department of Justice Arbitration Guide