Arbitration in the United States of America

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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. In practice arbitration is generally used as a substitute for judicial systems, particularly when the judicial processes are viewed as too slow, expensive or biased. Arbitration is also used by communities which lack formal law, as a substitute for formal law.

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.

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Species of Arbitration

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. The reasoning for this was that the power of the arbitrator arose solely from the mutual consent of the parties to his jurisdiction; but by the time a dispute reached the point that one party wished to take it to an arbitrator, the other often preferred to take their chances in court instead. Thus, without the consent of both parties to his jurisdiction, the arbitrator lacked the power to decide the case.

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.

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