Arbitration is a private, informal process in which all parties agree to submit their disputes to one or more impartial persons authorized to do so. This method of dispute resolution can be beneficial when two equal parties come together to design an arbitration procedure and choose an arbitrator that both sides trust. It is important to rely on arbitrators with the experience needed and on rules that guarantee that claims are resolved quickly, cheaply, and fairly. The American Health Lawyers Association (AHLA) provides a standard arbitration clause or a guide to adapt an agreement to the client's needs. Although it is difficult to obtain reliable data on this subject, it should be noted that some referees in the recent New York Times series on compulsory arbitration admitted that these pressures favored repeat players.
However, in most cases, an arbitration clause does not mention the availability of arbitrations for the entire class. In this last category of ad hoc cases, it is the mandatory arbitration agreement itself that provides the rules that establish arbitration procedures. Consumers have successfully challenged arbitration in cases where it would be prohibitively expensive for them to arbitrate their claims. Employee success rates in compulsory arbitration are much lower than in federal or state courts, as employees in compulsory arbitration only win about a fifth of the time (21.4 percent), 59 percent more than in federal courts and only 38 percent more than in state courts. Therefore, the neutrality and impartiality of the arbitrator are essential to ensure the fairness of the arbitral process.
The greater flexibility and informality of arbitration compared to judicial procedures means that the parties rely much more on the neutrality, experience, and impartiality of the arbitrator to achieve a fair outcome. The most concerning development of arbitration has to do with the combination of arbitration and class action exemptions. Notwithstanding the provisions of the preceding paragraph with respect to applicable substantive law, any arbitration conducted pursuant to the terms of this Agreement will be governed by the Federal Arbitration Act (9) U. S. C.
The most controversial issue of current arbitration law arises from the interaction between arbitration and class action lawsuits. To address concerns about fairness in compulsory arbitration in the 1990s, several interested organizations jointly drafted a due process protocol that established basic rules of fairness that must be followed in arbitration. The most significant effort to address mandatory arbitration at the federal level has been the proposed Arbitration Equity Act (AFA).In other words, even if the entire contract (in this case, a commercial lease) was invalid, the arbitration clause survived because, according to the Court, the promise to arbitrate was separable from the rest of the contract.