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Comprehensive
Legal Resources |
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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.
Labor arbitration
Arbitration has also been used as a means of resolving labor disputes for more than a century. Labor organizations in the United States, such as the National Labor Union, called for arbitration as early as 1866 as an alternative to strikes to resolve disputes over the wages, benefits and other rights that workers would enjoy. Governments have also relied on arbitration to resolve particularly large labor disputes, such as the Coal Strike of 1902.
This type of arbitration is commonly known as interest arbitration, since it involves the mediation of the disputing parties' demands, rather than the disposition of a claim in the manner a court would act. Interest arbitration is still frequently used in the construction industry to resolve collective bargaining disputes. The United Steelworkers of America adopted an elaborate form of interest arbitration, known as the Experimental Negotiating Agreement, in the 1970s as a means of avoiding the long and costly strikes that had made the industry vulnerable to foreign competition. Major League Baseball uses a variant of interest arbitration, in which an arbitrator chooses between the two sides' final offers, to set the terms for contracts for players who are not eligible for free agency.
Unions and employers have also employed arbitration to resolve employee grievances arising under a collective bargaining agreement. The Amalgamated Clothing Workers of America made arbitration a central element of the Protocol of Peace it negotiated with garment manufacturers in the second decade of the twentieth century. Grievance arbitration became even more popular during World War II, when most unions had adopted a no-strike pledge. The War Labor Board, which attempted to mediate disputes over contract terms, pressed for inclusion of grievance arbitration in collective bargaining agreements. The Supreme Court subsequently made labor arbitration a key aspect of federal labor policy.
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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