What Is An Arbitration Agreement? What Are Its Essentials?


What is an arbitration agreement? Well, though an agreement, it can sometimes be in the form of a clause.

Now, very simply put, it is an agreement or broader contract. Through it, parties can settle matters out of court. Therefore, it provides clear guidelines about the whole procedure to all parties.

All parties to the arbitration set the terms in an arbitration agreement after careful consideration. Here, they state their free and clear will to agree to settle a dispute out of court.

So, hold tight as we discuss all about arbitration agreements with a special light on the US system.

What Is Arbitration?

What Is Arbitration?

Arbitration is a way to settle disputes. It is one of the most important parts of alternate dispute resolution. Most importantly, it involves parties not taking the help of regular courts for dispute resolution.

Instead, they take the help of arbitrators. Moreover, the official arbitral tribunal also steps in to declare the decision. Thus, both parties try to get an arbitration award (final decision) that is in their favor.

This decision or award is binding in nature. So, it has the legal force of a court judgment unless the parties later go against it.

However, usually when parties choose arbitration as their method a dispute resolution, their options are limited. Later, they have fewer chances to choose litigation or review. Additionally, you may even have limited options for appeal compared to regular court cases. It’s not the same as court cases, other types of dispute resolution like mediation, or expert decisions.

Why Go For Arbitration And Not Litigation?

Why Go For Arbitration And Not Litigation?

Well, some may find that going to court and filing a lawsuit, is the best way for dispute resolution. In a lawsuit, they have lawyers who are experts in dispute resolution. Moreover, they can even hire contract or regulatory lawyers whenever they wish.

However, people find arbitration agreements more suited to resolve disputes regarding consumer or employment contracts. They may not be the best case for white-collar crimes like embezzlement, but they have their use.

Arbitration has many advantages that litigation simply does not. For example, they are faster and more cost-effective to begin with. The agreement, although a long one, has fewer formalities than a whole litigation.

Additionally, arbitration is more of a party or dispute-centric approach. We usually do not find contract laws to be too “personalized”. 

Thus, an arbitration allows parties to get special treatment. Moreover, they have more control over the dispute-resolution process. Additionally, when choosing arbitration over litigation, you will have an arbitrator to help you out on your specific subject matter.

Types Of Arbitration Agreement And Their Contents

Types Of Arbitration Agreement And Their Contents

What is an arbitration agreement for employment? What are the common contents for a business arbitration agreement? Let us tell you.

You can create arbitration agreements for various purposes. For example, it may be for the purpose of business, employment disputes and more.

So, What Are The Contents Of These Agreements?

Are there steps that come before the award stage of a successful arbitration?

An arbitration agreement will only come into question if both parties have a clear intention to reach a mutually acceptable place. This is because an arbitration will be a kind of a mix between a negotiation and litigation. Moreover, after the arbitration is over, the parties will have to accept the awards. Later on, they cannot change their mind and choose litigation.

Steps To Getting To An Arbitration Agreement

Steps To Getting To An Arbitration Agreement

So, these are the necessary elements to reach arbitration agreements.

Agreement To Choose Arbitration

Both parties agree to choose arbitration- this is the common ground. Thus, this should be the accepted method of settlement of any potential disputes. The parties state their mutual will to arbitrate through a contract or an agreement.

Discussion On Agenda

Next, there is a discussion about what the arbitration will be about. It is important to know the issues or the exact type of disputes. Thus, only after knowing the problem will the parties know what to solve through an arbitration.

Parties Get A Say On The Arbitrator

Yes, the parties can choose which arbitrators will help them. They can choose specific individuals. Additionally, they can visit an arbitration agency and choose from their panel of established arbitrators. Moreover, they can also take the help of other selection methods.

Are There Specific Commercial Arbitration Rules For This Agreement?

Are There Specific Commercial Arbitration Rules For This Agreement?

Indeed, there are rules. They govern the arbitration through each stage. These rules also let the parties decide the physical and virtual location where the arbitration will take place.

Do These Agreements Guarantee Confidentiality?

Yes. An arbitration agreement does contain a confidentiality clause. This clause safeguards the confidentiality of the parties and the details of the dispute. Thus, complete access to confidentiality without making it to public records is possible through an arbitration agreement.

Why Would You Read Carefully Before Signing An Arbitration Agreement?

Why Would You Read Carefully Before Signing An Arbitration Agreement?

Employers do tend to include arbitration agreements in employment contracts. These agreements stand to their advantage. Employees may sign them without grasping the terms, but that may lead to heavy outcomes in the future.

Therefore, before you sign any contracts, it’s a good idea for you to hire a lawyer. For starters, the contract may seem confusing. Thus it is smart to ask a lawyer to explain the important parts.

Can An Employee Still Go To Court Despite An Arbitration Agreement?

Just because someone signed an arbitration agreement does not mean that the court is out of reach when they need it. They can still complain to the Equal Employment Opportunity Commission. The commission can sue the employer.

What Does An Arbitration Agreement Look Like?

What Does An Arbitration Agreement Look Like

Arbitration agreements contain terms that settle problems like disputes over pay, contract issues, or injury. These agreements can handle different types of issues. Moreover, in special cases, they focus on certain problems mentioned in the contract. So, here is the perfect arbitration agreement sample for you.

To Conclude

Thus, we now come to the end of our article on an arbitration agreement. Let us go through a short recap. Arbitration agreements are like a plan set before a problem comes up. They are the deals between two parties, like employers and employees. Moreover, these mostly dictate how to handle disagreements. These agreements decide that if there’s a conflict, later on, both sides will use a specific process to solve it. It’s a way to work things out without going to court.

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