Arbitration is a dispute resolution process where one or more impartial persons (the “arbitrator”) decides a controversy after the parties have had an opportunity to present their facts and views. Unlike mediation, where the neutral is a facilitator whose job it is to assist the parties in understanding the issues and to productively guide the parties into making their own decision, an arbitrator has the duty, much like a judge or jury, of making a decision for the parties when they are unable to do so.
Generally, arbitration is a voluntary and usually binding process that is extra-judicial, that is, one which occurs outside of the supervision of the court and pursuant to a written agreement entered into by the consent of the parties to the dispute. The agreement or contract normally contains an explanation of the rights of the parties to attend arbitration in the event of a disagreement and specifies a procedure for selecting the arbitrator and conducting a hearing. It may be entered into before or after litigation has begun and is commonly enforceable just as contracts are enforced.
There exists in North Carolina a strong public policy which favors the settling of disputes by arbitration. There are several state laws which govern the use of arbitration in various types of controversies and, historically, the process has been employed to resolve, most frequently, commercial and consumer disagreements. In 1999, the North Carolina Family Law Arbitration Act was enacted in order to extend the use of arbitration to family law issues other than the divorce itself.
Arbitration does have certain distinct advantages. It can be used after initial settlement attempts or mediation have failed, and it can insure the prompt resolution of disputed matters in a manner which may be less expensive than traditional litigation. Moreover, in the arbitration process the parties choose their own neutral by agreement. This results in a more reliable decision resolution process because the parties have the ability to select a decision maker who is knowledgeable in the subject matter with which they are involved and who, unlike a judge, is not influenced by such pressures as resolving a heavy trial docket.
In addition, in using this form of alternative dispute resolution, the parties are able to set their own rules for the procedure of the arbitration hearing, including what conditions of privacy will apply. They can also specify where and when the hearing will be held, such as in a comfortable private office on a weekend or after work, making the process more convenient and less threatening.
While arbitration is a more adversarial process than mediation, it still has the advantage of fostering less contentiousness than litigation, thus preserving a more positive working relationship between the participants for the future.