What is Arbitration?
Arbitration is a legal process which takes place outside of the courts, but still results in a final and legally binding decision similar to a court judgment. Parties involved in Arbitration are effectively opting out of the court system and submitting their case for resolution by a neutral, third party Arbitrator. The reasons for selecting Arbitration vary from case to case. Arbitration is generally faster, less expensive and more informal than going to court. It also has the advantage of being private and confidential.
MFC has published MFC Arbitration Rules and Procedures which govern the Arbitration process and procedures. Binding Arbitration clauses can be written into most contracts, requiring that in the event a dispute arises in conjunction with the contract, the parties will go to binding Arbitration instead of to court. The cost of Arbitration is generally shared by the parties.
The decision of an Arbitrator is as binding on the parties as a court judgment, and it can be enforced by the courts, if necessary.
What types of disputes can be resolved through Arbitration?
Arbitration has been successfully used for all industries and all types of disputes. Within the Construction industry, the types of cases successfully resolved through Arbitration include construction defect, payment issues, construction related real estate, single and multi-party, residential and commercial issues.
It makes no difference whether liability is admitted or contested, whether the case is in litigation or not yet filed, or whether the dispute involves a few thousand dollars or many millions of dollars, Arbitration works effectively. Arbitration puts the decision in the hands of a respected neutral party.
If you are not sure which method is best to resolve your dispute, MFC has developed a guide for How To Choose Which MFC Dispute Resolution Service Is Best For My Case between Mediation, Arbitration, Dispute Review Board or Expert Witness depending on the parties, the goals for outcome, and the timing. If you have any question, please call MFC to speak with a Dispute Resolution Specialist.
What are the benefits of Arbitration?
Arbitration provides distinct advantages over the court system in many different types of disputes.
- Construction Dispute Specialist v. Generalist
The most important benefit of MFC Arbitration is its ability to provide the parties with an Arbitrator experienced in the subject matter of the dispute. Judges within the court system are generalists hearing all civil cases. Many Arbitrators are also generalists with a broad background of experience.Most construction dispute cases involve complex evidence, testimony, and documents specific to the building industry. An MFC Arbitrator with extensive knowledge of construction allows for a quick understanding of the issues, which in turn saves time and expense.
- Private and Confidential
Another advantage of Arbitration is that it is private and confidential. Conducted by private agreement, Arbitration is not open to the public and the decisions reached are not a matter of public record. This is important as all court judgements do go into the public record that can be searched and read by anyone. In addition, judgements can negatively affect the party’s credit ratings for seven years.
- Faster and Lower Cost
Arbitration is generally faster and less expensive than litigation due to the less formal evidence and discovery rules. In addition, the schedule is not dependent on the over-full, public court calendar.
How is an Arbitration case started?
You have determined you have a dispute that you cannot resolve yourself, mediation isn’t appropriate and either both sides have agreed to Arbitration or you have an Arbitration clause written into your contract. Call MFC to start the Arbitration process and we will send you out the “Getting Started – Arbitration” information packet.
How should I prepare for an Arbitration hearing?
Prior to the Arbitration hearing, all parties should gather sufficient information to present their case to the Arbitrator. Each party should complete the MFC Submission to Arbitration including “Items in Dispute”, if you will be represented and list of witnesses as well as the retention agreement from the “Getting Started – Arbitration” information packet.
What takes place in an Arbitration?
All parties to a dispute should be present at the Arbitration hearings. For example, participants in a construction defect case typically include the Arbitrator, the parties involved, their attorneys if represented, the parties’ witnesses, and sometimes insurance adjusters.
All parties, representatives and the Arbitrator meet in a joint meeting format. The Arbitrator makes introductory remarks including the Arbitrator’s oath, confidentiality reminder, and verification of no conflict of interest. Each person who will participate then takes the oath of truth.
After this, each party is given the opportunity, in turn, to explain their case to the Arbitrator without interruptions, starting with the Complainant. After each side has presented their case the other side will have the opportunity to comment as well as cross examine them. The Arbitrator may ask questions at any time.
Once both cases have been heard and all questions asked and answered, the Arbitrator will adjourn the hearing. The Arbitrator may request additional documents or information needed to decide the case that will be accepted after the hearing is adjourned. Once all final information is received the Arbitrator will close the hearing and send out a legally binding award within 30 days.
Arbitration conducted through Myles F. Corcoran Construction Consulting, Inc. (MFC) is governed by the applicable MFC Rules of Arbitration.
Is Arbitration final?
Binding Arbitration awards are final and binding on all parties to the Arbitration. They may not be appealed except under very limited circumstances provided by statute. Awards may be confirmed in any court having jurisdiction and, thereafter, carry the same force and effect as an original court decision.
How much does Arbitration cost?
MFC charges hourly or per diem fees for the Arbitrator’s time, which will be billed after the Arbitration is concluded. MFC collects a retainer before the session based on the estimated time the Arbitration will take.
In most cases, the parties agree to divide the Arbitration costs. With MFC there will be a clear fee agreement prior to the Arbitration taking place. Please call MFC and speak with a Dispute Resolution Specialist to discuss your options and help you estimate a cost range.
For a mid-project dispute, a Neutral Construction Expert can be brought in at any time, without a formal Arbitration, to hear an issue and give a recommendation or assist in a negotiated resolution. The project can keep moving and the dispute is resolved on-site before it can escalate into two opposing entrenched positions.
How is Arbitration different from Mediation?
The main difference is that Arbitration places control of the outcome in the hands of the neutral Arbitrator. Arbitration involves presenting a case for an Arbitrator to make a legally binding decision.
In Mediation control of the outcome stays in the hands of the parties. The goal of Mediation is to find common ground and creative solutions to develop an agreement that will satisfy both parties.
Both are alternatives to the public legal system. Both have the advantage of being able to choose Arbitrators or Mediators who are construction experts as opposed to judges who are generalists. Both are typically faster and less expensive than the court system.
How are Arbitration clauses used?
Many businesses and attorneys routinely insert Arbitration clauses into contracts. By using such a clause, the parties are pre-agreeing to use Arbitration first in the event of a dispute. See sample Arbitration Contract Clause.
How can I get more information about Arbitration?
MFC has a library of dispute resolution articles and other materials that are available on our website https://www.mfcbuild.com/resources and upon request.
We are happy to furnish you with references.
MFC has developed a guide for How To Choose Which MFC Dispute Resolution Service Is Best For My Case between Mediation, Arbitration, Dispute Review Board or Expert Witness depending on the parties, goals for outcome, and timing. Please call MFC to speak with a Dispute Resolution Specialist.
Sample Arbitration Contract Clause
A business contract, lease or other written contract may contain an Arbitration clause. By using such a clause, the parties to the contract agree to Arbitrate any future disputes. As with any clause, all parties must agree to it’s use in the contract before the contract is signed. The following Arbitration clause language may be modified to suit the needs of the parties or used “as is” in order to use the services of MFC, if Arbitration is ever needed.
SAMPLE ARBITRATION CLAUSE:
In the event a dispute shall arise between the parties to this [agreement, contract, lease, etc.], it is hereby agreed that the dispute shall be referred to Myles F. Corcoran Construction Consulting, Inc. (MFC) by agreement of the parties; for Arbitration in accordance with the applicable MFC Rules of Arbitration. The Arbitrator’s decision shall be final and legally binding and judgment may be entered thereon.
Each party shall be responsible for its share of the Arbitration fees in accordance with the applicable MFC Rules of Arbitration. In the event a party fails to proceed with Arbitration, unsuccessfully challenges the Arbitrator’s award, or fails to comply with the Arbitrator’s award, the other party is entitled to costs of suit, including a reasonable attorney’s fee for having to compel Arbitration or defend or enforce the award.*
MFC suggests that the parties consider Mediation prior to Arbitration. Mediation can save time and money, by either resolving the matter or narrowing the issues to be Arbitrated. The Arbitration administrative fee will be waived if parties agree to mediate with MFC prior to Arbitrating. A Mediation first, Arbitration second clause can be used to require that Mediation take place prior to Arbitration.
*Contract Clause used with permission from “United States Arbitration and Mediation”.