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What is arbitration?

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Overview

Arbitration is a quasi-judicial process. This means it’s not like a trial before court and there is no judge involved. Instead, parties go before neutral third party — the arbitrator — and accept the arbitrator’s decision as binding. If one party disobeys the arbitration decision, the other party can go to courts to enforce it.

Parties may end up in arbitration for a variety of reasons.  Sometimes, the dispute arises from a contract that requires parties to resolve issues through arbitration. Other times, there may be a piece of legislation that requires parties to attend arbitration (e.g. insurance claims). Other times, the court may order parties to go through arbitration.

Advantages of arbitration

There are a number of benefits to resolving disputes through arbitration as opposed to going before courts. First, arbitration is significantly less costly than court proceedings. Additionally, the arbitrator is usually chosen by both sides of the dispute. This is someone who often has specialized expertise in the industry or area (e.g. insurance or trade disputes). Judges, on the other hand, may know the law well but may not have specialized expertise in the area of dispute. Moreover, arbitrations are private and the public will not know the details of the case.  Court proceedings on the other are almost always open to the public. If you don’t want bad press around your dispute, arbitration may be a better choice for you to keep your business reputation intact.

The rules of arbitration

Every province and territory has an arbitration act that sets out the rules of the arbitration process. Provincial law on arbitration applies unless the parties put in their agreement that they want their arbitration process to be conducted in a different way. In the agreement, parties may specify whether they want their arbitration to be governed by provincial law or otherwise.

For example, they can put in their contract if they want one arbitrator or a panel of arbitrators. They can also stipulate if they want to reserve the right to appeal the arbitrator’s decision to a court and on what basis. Alternatively, the parties may set out in their agreement that the arbitration decision is final and no appeals are allowed. These are important provisions that should be discussed in detail when parties enter into agreements. It’s best to talk about this process before any disputes arise.

Parties may not contract themselves out of other things. For instance, the arbitration process may not be biased. There must be fairness and equality. Both sides must have an equal chance of presenting their case and responding to the other side.

The arbitrator may decide some other elements of the process, including the time and place of arbitration hearings; the deadlines by which documentary evidence should be provided to the arbitrator; whether to use an expert; awarding costs for the arbitration process; and awarding interest.

Read more:

Dispute Resolution Reference Guide - Arbitration

British Columbia Arbitration Act