Arbitration Defined:
Arbitration is a form of dispute resolution by which parties to agree to submit to have their dispute/disagreement finally decided by a single arbitrator or panel of arbitrators. Many consider arbitration to be a more effective and efficient method of dispute resolution than litigation through a court of law. When the agreement to submit the dispute for decision by an arbitrator is made after the dispute arises, the arbitration is generally understood to be made by submission. In many cases parties agree to submit disputes to arbitration before disputes arise, generally as part of a contract. When the dispute arises and one or both of the parties elect to arbitrate, it is generally understood to be a demand for arbitration. As such, Arbitration is generally understood to be voluntary. However, inasmuch as a party may have a change of mind after making the agreement to arbitrate, they may be compelled to arbitrate in any event.
At its essence, arbitration is a process in which a neutral party (the arbitrator) hears a dispute between one or more parties and, after considering all relevant information, renders a final decision in favor of one of the parties. Arbitration decisions may be either binding or non-binding, depending on the terms of the arbitration agreement. Binding arbitration decisions may be confirmed by a court and carry the same significance as a court judgme
Mediation Distinguished:
Mediation, on the other hand, is generally a voluntary dispute resolution process during which a party may remove himself from the process at any time; initially the parties generally consent to participate in good faith and work toward a mutually agreeable resolution, and if reached, the agreement can be made binding by drafting a settlement agreement. Mediations, as opposed to arbitrations, are not “decided” in favor of one party or another. In facilitative mediation the mediator simply facilitates the negotiation process. In evaluative mediation, the mediator will counsel parties on the strengths and weaknesses of their case and gauge each party’s likelihood of success if the dispute proceeds to arbitration or litigation.
Arbitration, on the other hand, is a dispute resolution process in which a the arbitrator or panel of arbitrators hear a dispute between one or more parties and, after considering all relevant information, renders a final decision in favor of one of the parties. Arbitration decisions, however, may be either binding or non-binding, depending on the terms of the arbitration agreement and the agreement of the parties. Binding arbitration decisions may be confirmed by a court, and a court judgment generally entered, which then gives the arbitration award the force of law.
Governing Law:
The Federal Arbitration Act (FAA), 9 USC 1 et seq., provides for the enforcement of written agreements to arbitrate. The Michigan Revised Uniform Arbitration Act (RUAA), MCL 691.1681 et seq. became effective July 1, 2013, repealing the Michigan Arbitration Act (MAA), MCL 600.5001 et seq. Matters may proceed and be decided differently under each act. Thus, it is important that the parties understand which act governs their arbitration. Additionally, common-law arbitration may continue to exist in Michigan. Wold Architects & Eng’rs v Strat, 474 Mich 223, 713 NW2d 750 (2006). When an arbitration agreement does not comply with statutory requirements, it may be held to be a common-law arbitration agreement, and parties should understand this distinction as well.
Under the Michigan Revised Uniform Arbitration Act (RUAA), many matters proceed differently than under the former Michigan Arbitration Act. Parties and advocates should famliarize themselves with such differences, some of which include:
1. There are certain rights and matters which parties may not waive in making an arbitration agreement.
2. The RUAA makes certain that courts will determine substantive questions of arbitrability — whether an agreement to arbitrate exists. However, an arbitrator will determine procedural issues of arbitrability such as timeliness, notice, laches, and estoppel. Parties and advocates must consider the effect of asking an arbitrator to determine substantive questions of arbitrability, and whether whether submitting the question to the arbitrator constitutes a waiver of having the question determined by the courts.
3. The RUAA now provides that after an arbitrator is appointed: [t]he arbitrator may issue orders for provisional remedies, including interim awards, as the arbitrator finds necessary to protect the effectiveness of the arbitration proceeding…to the same extent and under the same conditions as if the controversy were the subject of a civil action.
4. Unless parties have provided for a reasonable means of notice in their arbitration agreement, Section 9 requires that they use either certified or registered mail with a return-receipt request and that the receipt is obtained.15 The term “obtained” is intended to mean that the receipt was returned regardless of whether the recipient actually signed it. Section 9(1) explicitly requires that all parties be given notice of the impending arbitration, not just the party against whom the arbitration claim is filed.
5. The RUAA specifically authorizes arbitrators to order pre-hearing discovery when “appropriate in the circumstances, taking into account the needs of the parties to the arbitration proceeding and other affected persons…and the desirability of making the proceeding fair, expeditious, and cost effective.”21 Section 17(7) allows parties to secure necessary information in an arbitration involving persons located outside the state.
Representation:
The RUAA specifically allows a part to an arbitration proceeding to be represented by a lawyer. It is noted that Michigan ethics rules opinions provide that out-of-state attorneys seeking to appear in a Michigan case or proceeding, whether before a court, administrative tribunal or agency, or arbitration proceeding, must comply with Michigan’s pro hac vice rule. Lawyers should review MCR 8.126, MCR 9.108, and Rule 15 of the Rules Concerning the State Bar of Michigan to fully understand the requirements and procedure.
Reasons to Arbitrate:
Given the above, the following have been suggested as reasons to arbitrate:
- Parties want a more private rather than public process.
- Parties want a process that is less likely to adversarial and formal, and more likely to be flexible and time efficient
- Parties want more managed discovery or pretrial procedures from the outset
- Parties want to select their own determiner of fact and law, particularly persons who are experts in the field involved.
- Parties want to design their own process.
- Parties want more certain finality with limited or no appeal.
- Parties want to reduce the cost and time normally associated with getting to the end of judicial litigation.
- Parties want to avoid a jury trial.
Reasons not to Arbitrate:
Generally speaking, parties who value the opposite of the above, would offer them as reasons not to arbitrate.
All in all. the determination whether to arbitrate, and which type of arbitration to agree to is greatly influenced by relationship of the parties and their advocates, and the style of the arbitrator. Some counsel or arbitrators may treat arbitration like litigation, with no limits as to discovery, prehearing motions, evidence, or trial procedure. Some are unable or unwilling to abandon standard jury trial tactics or accepted less formal and more flexible proceedings. As such, a party and his advocate should keep in mind whether it is realistic to expect all involved to conduct themselves in a manner to effectuate the reasons to arbitrate.