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Mediation
and arbitration, in the context of United States law, is
a form of alternative dispute resolution — specifically,
a legal alternative to litigation whereby the parties to
a dispute agree to submit their respective positions
(through agreement or hearing) to a neutral third party
(the arbitrator(s) or arbiter(s)) for resolution.
Arbitration may also serve a distinct purpose: as an
alternative to strikes and lockouts as a means of
resolving labor disputes. Labor arbitration comes in two
varieties: interest arbitration, which provides a method
for resolving disputes about the terms to be included in
a new contract when the parties are unable to agree, and
grievance arbitration, which provides a method for
resolving disputes over the interpretation and
application of a collective bargaining agreement.
Commercial and other forms of contract arbitration
Agreements to arbitrate were not enforceable at common
law, though once the parties had actually submitted a
pending dispute to an arbitrator, the arbitrator's
judgment was usually enforceable. During the Industrial
Revolution, large corporations became increasingly
opposed to this policy. They argued that too many
valuable business relationships were being destroyed
through years of expensive adversarial litigation, in
courts whose rules differed significantly from the
informal norms and conventions of businesspeople (the
private law of commerce, or jus merchant). Arbitration
was promoted as being 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.
Due 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 almost 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.
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 in three cases which came to be known as the
Steelworkers' Trilogy. The Court held that grievance
arbitration was a preferred dispute resolution technique
and that courts could not overturn arbitrator's awards
unless the arbitrator exceeded his or her authority,
engaged in fraud or corruption, or violated basic due
process.
Judicial arbitration
Some state court systems have promulgated court-ordered
arbitration; family law (particularly child custody) is
the most prominent example. Judicial arbitration is
often merely advisory dispute resolution technique,
serving as the first step toward resolution, but not
binding either side and allowing for trial de novo.
Litigation attorneys present their side of the case to
an independent tertiary lawyer, who issues an opinion on
settlement. Should the parties in question decide to
continue to dispute resolution process, there can be
some sanctions imposed from the initial arbitration per
terms of the contract.
Proceedings
Under U.S. law, either party to an arbitration may
appeal from the arbitrator's decision to a court,
however the court will generally not change the
arbitrator's findings of fact but will decide only
whether the arbitrator was guilty of malfeasance, or
whether the arbitrator exceeded the limits of his or her
authority in the arbitral award or whether the award
conflicts with positive law. The Supreme Court has
described the standard of review as one of the narrowest
known to Western jurisprudence. Wherever so seen,
arbitration may be the best approach to the legal
manners and parties involved.
Arbitrators
Arbitrators have wide latitude in crafting remedies in
the arbitral decision, with the only real limitation
being that they may not exceed the limits of their
authority in their award. An example of exceeding
arbitral authority might be awarding one party to a
dispute the personal automobile of the other party when
the dispute concerns the specific performance of a
business-related contract.
It is open to the parties to restrict the possible
awards that the arbitrator can make. If this restriction
requires a straight choice between the position of one
party or the position of the other, then it is known as
pendulum arbitration or final offer arbitration. It is
designed to encourage the parties to moderate their
initial positions so as to make it more likely they
receive a favorable decision.
No definitive statement can be made concerning the
credentials or experience levels of arbitrators,
although some jurisdictions have elected to establish
standards for arbitrators in certain fields. Several
independent organizations, such as the American
Arbitration Association, offer arbitrator training
programs and thus in effect, credentials. Generally
speaking, however, the credibility of an arbitrator
rests upon reputation, experience level in arbitrating
particular issues, or expertise/experience in a
particular field. Arbitrators are generally not required
to be members of the legal profession.
To ensure effective arbitration and to increase the
general credibility of the arbitral process, arbitrators
will sometimes sit as a panel, usually consisting of
three arbitrators. Often the three consist of an expert
in the legal area within which the dispute falls (such
as contract law in the case of a dispute over the terms
and conditions of a contract), an expert in the industry
within which the dispute falls (such as the construction
industry, in the case of a dispute between a homeowner
and his general contractor), and an experienced
arbitrator.
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