Authority of the arbitrator: Overview, definition, and example
What is the authority of the arbitrator?
The authority of the arbitrator refers to the legal powers and responsibilities granted to an arbitrator in the context of an arbitration proceeding. An arbitrator is a neutral third party selected by the disputing parties to resolve their disagreement outside of court. The authority of the arbitrator includes the power to hear the case, make decisions, issue binding rulings, and resolve issues related to the dispute, as defined by the arbitration agreement or applicable laws. The arbitrator’s authority is limited by the terms agreed upon by the parties and the rules governing the arbitration process, such as those set forth by international organizations or specific legal frameworks.
In simpler terms, the authority of the arbitrator means the official power they have to make decisions, hear evidence, and settle disputes between parties during arbitration.
Why is the authority of the arbitrator important?
The authority of the arbitrator is crucial because it ensures that arbitration remains a valid, legally recognized process for resolving disputes. It establishes the arbitrator’s role and defines their limits, helping to maintain fairness and transparency in the resolution process. A clearly defined scope of authority also protects the rights of both parties, ensuring that the arbitrator does not overstep their bounds or issue decisions that fall outside the scope of the arbitration agreement.
For businesses and individuals, understanding the authority of the arbitrator helps set expectations for how the arbitration process will unfold and what the final decision may entail. For arbitrators, knowing their authority ensures they perform their duties within the boundaries of the law and the arbitration agreement.
Understanding the authority of the arbitrator through an example
Imagine two companies entering into an arbitration agreement to resolve a dispute over a breached contract. The agreement specifies that the arbitrator has the authority to make binding decisions on the matter, but the arbitrator is not authorized to award punitive damages or alter the terms of the contract. In this scenario, the arbitrator's authority is limited to resolving the dispute in a way that aligns with the contract's terms and the legal framework governing the arbitration.
In another example, an employment dispute between an employee and employer is brought before an arbitrator. The parties involved have agreed that the arbitrator has the authority to award damages, order reinstatement, or impose other remedies, but the arbitrator cannot issue a decision that conflicts with employment law or public policy. The scope of the arbitrator’s authority is clearly defined to prevent overreach.
Example of an authority of the arbitrator clause
Here’s how an authority of the arbitrator clause might appear in an arbitration agreement:
"The arbitrator shall have the authority to resolve any disputes arising under this Agreement in accordance with the rules of [specify arbitration body, e.g., the American Arbitration Association]. The arbitrator's decision shall be final and binding, subject to the limitations specified in this Agreement. The arbitrator shall not have the authority to award punitive damages, alter the terms of the Agreement, or hear claims that are outside the scope of this Agreement."
Conclusion
The authority of the arbitrator defines the scope of their powers and responsibilities during the arbitration process. It ensures that the arbitration remains within legal and contractual boundaries, provides a clear framework for resolving disputes, and protects the rights of the parties involved. Understanding the authority of the arbitrator is essential for both disputing parties and the arbitrator, as it sets expectations and ensures a fair process.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.