Every day Florida business owners enter into agreements that include arbitration clauses. However, many of these individuals are unfamiliar with the arbitration process. As a Florida business owner, it’s essential to know: How does business arbitration work?
Today, arbitration clauses are used regularly in business contracts and service agreements. When parties consent to arbitration, they are agreeing to resolve their disputes through a form of alternative dispute resolution (ADR).
What is Arbitration?
Arbitration is a process that involves parties appearing before a neutral third party (an arbitrator) to resolve their disputes. The arbitrator will listen to both sides argue their positions and review evidence. Unlike trial, arbitration is a private process.
What is the Difference Between Arbitration and Mediation?
Both mediation and arbitration are forms of ADR that use a neutral third party to assist with resolving contested issues. However, a mediator’s role is to help the parties facilitate settlement. The mediator cannot rule on or make decisions regarding the dispute. By contrast, an arbitrator acts as a factfinder and has the authority to make decisions about the contested matter.
Mediation is also non-binding, meaning that the parties don’t have to settle their dispute through the process. In arbitration, however, what is decided by the arbitrator may be binding on both parties.
The two processes work differently as well. During mediation, the parties may state their positions and then work towards settlement in separate rooms. Arbitration is more like an informal trial wherein both sides will make arguments and present evidence.
The Florida Arbitration Process
When parties use arbitration for dispute resolution, the process tends to take less time and be less expensive than traditional litigation. It also tends to be less formal.
Typically, the Florida arbitration process occurs as follows:
Beginning the Arbitration Process
Florida business owners can initiate arbitration one of two ways:
- according to the language included in their arbitration clause, or
- voluntarily if there is not an arbitration agreement.
A person initiates an arbitration proceeding by giving notice to the other party. If the arbitration is not part of an existing agreement, the notifying party will need to follow certain statutory procedures to start the process.
Logistical Aspects
Next, the parties will need to agree on certain logistical aspects of the arbitration process, including:
- Choosing a location,
- Deterring whether they will use a single arbitrator or tribunal
- Selecting an arbitrator
- Deciding on arbitration rules
- Other aspects of the arbitration that are specific to the case
Sometimes, parties don’t mention rules in their arbitration clauses. However, those that do may refer to the American Arbitration Association (AAA) rules. If the AAA rules are referenced, the arbitrator will typically use them.
Selecting an Arbitrator
One of the primary benefits of arbitration is selecting an arbitrator with specialized knowledge regarding the dispute subject matter. If the parties cannot choose an arbitrator, one can be court-appointed.
Preliminary Matters
After selecting an arbitrator, the parties will complete various pre-arbitration tasks to prepare for the process. This typically involves deciding on the witnesses and evidence to be used at the hearing. How this phase of the process unfolds usually depends on the terms of their arbitration agreement.
Arbitration Hearing
Once the parties have completed their preliminary arbitration tasks, they will schedule the arbitration hearing. These hearings tend to be less formal than a trial. They typically involve the presentation of evidence and taking witness testimony. Sometimes, the parties will submit documents after the hearing to supplement the record or make written closing arguments.
The Arbitrator’s Award
After both sides have presented their evidence, the arbitrator will issue a decision and state the terms of the award. Depending on the circumstances, the decision and award may be binding on the parties. Typically, the parties will only be permitted to appeal an arbitration award under limited circumstances.
Depending on your needs, an arbitration clause may be beneficial for your business agreement. As you draft your Florida business contract, you should work with an experienced Florida business attorney. You and your lawyer can review the pros and cons of including an arbitration clause and determine the best way to protect your interests.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent small business clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.