When a party is looking to begin the process of arbitration, they will usually create and send a demand for arbitration. A demand for arbitration is what will start the arbitration process as the parties have agreed upon. Those on the receiving end may or may not understand what the process means, but they will quickly be immersed in the world of arbitration. Understanding what demand for arbitration is, what needs to be included, and when it can be used is a vital component to effectively starting the arbitration process. Additionally, it is important to understand the process that the demand will start to be prepared for what will come after. Arbitration is a valuable resource for alternative dispute resolution, and understanding how to begin this process gives the parties access to this resource. This article will explore the idea of a demand for arbitration and its role in the overall process of arbitration.
An Introduction to Arbitration:
Arbitration is an alternative dispute resolution mechanism that has exploded in popularity around the globe in the last few decades. Instead of presenting evidence in front of a judge or jury and having them decide the case, the parties will present their case to an arbitrator or a panel of arbitrators who decide the case. While this may not seem much different from litigation, several key differences have impacted the popularity of arbitration. Arbitration allows the parties to keep the dispute confidential and allows the parties to have a final resolution without getting tied up in years of appeals. Arbitration is also voluntary, which means that the parties have to both opt into arbitration at some point, which makes it impossible for one party to force the other into arbitration.
Arbitrators are neutral third parties that are appointed by the parties or the organization under which the parties have agreed to arbitrate. Arbitrators are obligated to disclose any potential conflicts that may arise between their own lives and the position of either of the parties, as well as stop arbitration if an issue comes up that may call their independence into question. Additionally, they must act neutrally while conducting the arbitration, and one-sided actions may be caused by to overturn of the award. Many arbitrators will draw upon years of experience and expertise in the field to aid in their decisions and help the process move along efficiently.
Explaining a Demand for Arbitration:
A demand for arbitration is a formal request to both the organization that handles the arbitration under the agreement and the other party. This request will begin the process and start any timelines that need to be met. It must be served on the party that is not requesting the arbitration and given to the organization that is overseeing the arbitration. The demand must be made in conjunction with an agreement to arbitration between the parties. This can happen in two ways: pre-dispute or post-dispute. pre-dispute agreements are often contained in a contract between the parties that requires that all disputes that arise under the contract will be submitted to arbitration. This is often called an arbitration clause. A post-dispute agreement is an agreement between the parties where they agree to submit the specific dispute to arbitration. In either case, the parties must agree to arbitration to initiate the process. Depending on the type of agreement that the parties have, a demand for arbitration may come as a surprise or may be expected. Regardless, once the demand has been served and filed with the organization, the process will begin.
Important Elements of the Demand:
When creating a demand for arbitration, several elements need to be included to ensure that the demand meets the requirements of the organization servicing the arbitration. The demand will need to be in writing. These elements are:
- Parties: One of the most important parts of the demand is the identification of the parties. For two-party disputes, this is easy. However, many arbitrations are complex and involve a variety of parties and claims. For demand, the parties that are known should be identified, but the parties may be able to be expanded if needed. However, if it is likely that the party may be involved, it may be better to include them rather than slow down the process.
- Dispute: The demand must also introduce the dispute and explain whether the dispute is arbitrable. Most disputes are arbitrable if there is an agreement, but this is the place to demonstrate that there is an agreement to arbitrate that covers this specific dispute. It should also give enough detail that if the organization needs to appoint an arbitrator, they will know if there is expertise that needs to be included.
- Relief Sought: The demand should also identify the relief that the party is requesting. This can be money or other relief that is needed. This helps the parties to understand what is needed and how to move forward.
Including these elements ensures that the demand for arbitration is received and the dispute can move forward.
The Process after the Demand:
Once the demand for arbitration is made, the parties will be in the process of arbitration. This process involves several steps that the dispute will move through to ensure that the dispute is resolved effectively and efficiently. These steps help the parties prepare adequately and know what to expect throughout the process. The process also ensures that the parties have a chance to present their case fully. These steps include:
Once a dispute arises and the parties have established that they have an agreement to arbitrate, they will need to initiate the arbitration process. Each arbitration provider has a different requirement for the initiation of the case. Several pleadings will need to be submitted to start the process. These are:
- Statement of the Claim: The party that is requesting the arbitration will also submit a statement of the claim. This statement will include the harm that occurred, the person or entity that harmed them, and what relief is requested. This is usually submitted with the demand for arbitration and served on the opposing party.
- Answer: Once the other party receives the statement of the claim and the demand for arbitration, they have the chance to answer. An answer is a response to the statement of the claim. It will list any defenses to the claim and any counterclaims against the initiating party.
These pleadings help orient the parties and create a full picture of the dispute for the arbitrator to understand once appointed.
Once arbitration has begun, the parties will need to have an arbitrator appointed. There are several ways to choose an arbitrator, each with its benefits and drawbacks. The method for arbitrator selection will usually be in the agreement, so this will need to be considered when drafting the agreement to ensure the best process. If it is not contained in the agreement, the parties may need to agree on how to choose the arbitrator as a portion of the demand for arbitration. An arbitrator may be appointed in any of the following ways.
- By the Parties: Many parties, especially when they are individuals or small businesses, will choose to find an arbitrator themselves. This can be through organizations or searches online. Both parties will need to agree on the arbitrator if the decision will be made by a single arbitrator. If it is a panel, each party will usually pick one arbitrator, and the two picked by the parties will choose the final arbitrator.
- By an Organization: The parties may also choose to have an organization appoint the arbitrator. This can be under the organization’s armor by simply asking for the organization’s input. The parties will need to submit a request that will often outline any experience or expertise that is needed, and the organization will appoint the arbitrator.
- By a Combination: In some cases, the appointment of the arbitrator will be done through a combination of the processes listed above. The parties will submit a request to an organization, which will send a list of possible arbitrators that the parties then choose an arbitrator from. This can often be helpful because it narrows the list to several arbitrators that the parties can choose from instead of starting from scratch, but it also gives the parties a choice in the matter.
Choosing the right arbitrator can impact the rest of the arbitration, so it is often wise to spend time and effort on a good arbitrator.
In more complex or formal cases, the parties may choose to have an initial hearing. Here the parties will outline the dispute, familiarize themselves with the process, the arbitrator, and each other, and discuss deadlines for discovery or other issues that need to be discussed. This will often be set shortly after the demand is made and the arbitrator is appointed. This hearing is less about the issues and more about ensuring the parties have a solid understanding of the rest of the process and are familiar with the arbitrator and any rules they will have.
Discovery is the process of exchanging information between parties. There will often be discussions about what needs to be exchanged and when it needs to be exchanged in the initial hearing. For complex issues, this process may take a long time as the parties are gathering evidence and exchanging it. The evidentiary rules are laxer in arbitration than in litigation, and the parties may have less recourse for discovery issues than they would in litigation. Documents and witnesses will need to be exchanged between the parties to help both parties adequately prepare for the hearing.
Once the discovery process has wrapped up, the parties will participate in a hearing. This is the place where the parties will present their case and the arbitrator will hear the evidence to decide. The party that requested the arbitration will often present first, giving the arbitrator any evidence, they have to support their claim. After this, the responding party will present their case and defenses. This process is usually highly dependent on the complexity of the case and the preparation of the parties. If the dispute is simple and the parties are prepared, it will probably go quickly and could be as short as a day or less. However, in complicated cases or when the parties are not fully prepared, the process may last days or weeks. The parties may also present their ask for how the case is resolved, which the arbitrator may consider when they are issuing an award.
The final step in the arbitration process is the award. This is the decision of the arbitrator that dictates how the dispute will be resolved. The arbitrator will usually set a timeline for this process to complete the case. Unlike litigation, where the decision must choose one side over the other, arbitration awards may take both points of view and create an award that blends the two viewpoints into one result that helps both parties. This award is often the final stop in arbitration, as there is very little room for an appeal. Once the parties have received their award, the arbitration will be complete and the dispute will be resolved. By moving through these steps and achieving an award, the parties are ready to move forward, and this resolution all started with a demand.