Arbitration and Mediation
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Types of Arbitration
Commercial and other forms of Contract Arbitration
Agreements to arbitrate were not enforceable at common law, though an arbitrator's judgment was usually enforceable (once the parties had already submitted the case to him or her). During the Industrial Revolution, this situation became intolerable for large corporations. They argued that too many valuable business relationships were being destroyed through years of expensive adversarial litigation, in courts whose strange rules differed significantly from the informal norms and conventions of businesspeople (the private law of commerce, or jus merchant). Arbitration appeared to be faster, less adversarial, and cheaper.
The result was the New York Arbitration Act of 1920, followed by the United States Arbitration Act of 1925. The USAA is now known as the Federal Arbitration Act. Thanks to the subsequent judicial expansion of the meaning of interstate commerce, the U.S. Supreme Court reinterpreted the FAA in a series of cases in the 1980s and 1990s to cover the full scope of interstate commerce. In the process, the Court held that the FAA preempted many state laws covering arbitration, some of which had been passed by state legislatures to protect their consumers against powerful corporations.
Since Commercial Arbitration is based upon either contract law or the law of treaties, the agreement between the parties to submit their dispute to arbitration is a legally binding contract. All arbitral decisions are considered to be "final and binding." This does not, however, void the requirements of law. Any dispute not excluded from arbitration by virtue of law (e.g. criminal proceedings) may be submitted to arbitration.
Other forms of Contract Arbitration
Arbitration can be carried out between private individuals, between states, or between states and private individuals. In the case of arbitration between states, or between states and individuals, the Permanent Court of Arbitration and the International Center for the Settlement of Investment Disputes (ICSID) are the predominant organizations.
Arbitration is also used as part of the dispute settlement process under the WTO Dispute Settlement Understanding. International arbitral bodies for cases between private persons also exist, the International Chamber of Commerce Court of Arbitration being the most important. The American Arbitration Association is a popular arbitral body in the United States. Arbitration also exists in international sport through the Court of Arbitration for Sport.
A growing trend among employers whose employees are not represented by a labor union is to establish an organizational problem-solving process, the final step of which consists of arbitration of the issue at point by an independent arbitrator, to resolve employee complaints concerning application of employer policies or claims of employee misconduct. Employers in the United States have also embraced arbitration as an alternative to litigation of employees' statutory claims, e.g., claims of discrimination, and common law claims, e.g., claims of defamation.
Judicial Arbitration
Some state court systems have promulged court-ordered arbitration; family law (particularly child custody) is the most prominent example. Judicial arbitration is often merely advisory, serving as the first step toward resolution, but not binding either side and allowing for trial de novo.
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