What is Arbitration in Law: Its Procedure & Significance


If you are searching for an explanation of the arbitration procedure, this article will help you get to know what is arbitration in law.

Two well-reputed building companies, say A and B have a dispute over a piece of land, A claims it to be their property, and B claims it to be their property. Both parties wish to resolve this matter as soon as possible so that they might start their construction as soon as possible.

Now take two political parties C and D, they have a dispute over something and want to solve their issues legally but do not want their case to go in public as it may affect their reputation. In both cases mentioned above, both sides want to solve their dispute but do not want to knock at the courtroom door due to their obvious reasons.

Arbitration in Law What is Arbitration in Law: Its Procedure & Significance
What is Arbitration in Law: Its Procedure & Significance 2

They can solve it through an alternate method. They will select a third party which will be neutral, that third party will be provided with evidence from both sides and will be asked to give the final verdict. This will save them time, money, and their reputation by keeping their issue private.

What is the proper method of Arbitration in Law?

If two parties have an issue over something that they both are unable to resolve on their own, they are required to go to arbitration for the peaceful settlement of their issue.

For this, they will first have to set an arbitration clause in which both parties will agree that they will accept the decision made by the arbitrator.

An arbitrator is the third (neutral) party that is being introduced by mutual consent of both the parties for resolving their matter.

Session timing will be set and a neutral environment for the sessions will be selected so that no party has any objection that the other party has the benefit of home-court.

Both parties will be asked to provide evidence on their behalf and the arbitrator will be tasked to go through all of them thoroughly.

After analyzing the evidence and hearing both sides’ stories, the arbitrator will give his final verdict and both parties will have to accept and adhere to the decision.

Does Arbitration hold any legal importance?

Arbitration holds legal value. The decision made by the arbitrator is considered to be official and legal. When the case is summed up, an arbitration certificate is allotted and in case, if the other party refuses to accept the final verdict given by the arbitrator, the first party can knock at the courtroom’s door and the court will force the other party to accept the decision.

Which issues can not be subjected to Arbitration?

The following two issues can not be subjected to arbitration and must be dealt with through courtroom trials:

  1. Matters that involve criminalism like murder, family law, and status, can not be resolved through arbitration. Such cases must be dealt with through the courtroom and proper courtroom trials must be held. However, if there is the involvement of the private rights of two parties, it can be brought to arbitration for the solution.
  2. Arbitration is not recommended for the protection of civil rights. For example, matrimonial matters may or may not be dealt with the arbitration. Custody cases are also not allowed to be sorted out through arbitration. In addition to this, industrial disputes involving the payment of income taxes and other tax matters can also not be solved through arbitration as they are related to the government. Such matters must be brought under the acknowledgment of court and must be solved through the legal way as prescribed by the law i.e., through the courtroom.

What are the Advantages and Disadvantage of arbitration?

  1. As both parties trust the arbitrator to be neutral, his decision will be respected and accepted by both the parties.
  2. It will save their time, as trials in the courtroom take a longer time to be settled, arbitration gives the benefit of saving that time.
  3. It is less expensive than courtroom trials, in courtroom trials, both parties have to hire lawyers, arbitration saves them from this.
  4. It is a private process and saves both parties’ reputation by keeping all the process private from the public.
  5. If the arbitration provision is binding, it will leave the losing party with no other options, they will have to accept the decision in anyway. They can not appear in court or can not step back from accepting the decision.

The parties can not cross-examine the evidence given by the other party. Unlike the courtroom trials, evidence in arbitration is kept secret from the other party, and the other party can not investigate or cross-examine the evidence.

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