External arbitration procedures: Overview, definition, and example
What are external arbitration procedures?
External arbitration procedures refer to the process of resolving disputes between parties through a neutral third party, known as an arbitrator, outside of the court system. These procedures are typically set up by an external organization or arbitration body, such as a professional association or an independent arbitration firm. Unlike internal arbitration, which occurs within an organization, external arbitration is handled by an outside entity that is not involved in the dispute. The arbitrator makes a binding decision that both parties must follow, making it an alternative to traditional litigation.
For example, if two businesses have a contractual dispute, they might choose to resolve the matter through an external arbitration procedure provided by a third-party arbitration service.
Why are external arbitration procedures important?
External arbitration procedures are important because they offer a more efficient and cost-effective way to resolve disputes compared to going through the court system. Arbitration is generally quicker, more private, and can be tailored to the specific needs of the parties involved. It also avoids the formalities and complexity of court proceedings, making it a more accessible option for many businesses and individuals.
Additionally, external arbitration procedures can provide more specialized expertise when a dispute involves complex technical or industry-specific issues, as arbitrators can be selected based on their expertise in the relevant field.
Understanding external arbitration procedures through an example
Imagine two companies, Company A and Company B, have a disagreement over a contract. Instead of going to court, they agree to use an external arbitration service provided by a professional organization. They choose an arbitrator with expertise in their industry. The arbitrator listens to both parties, reviews evidence, and then makes a binding decision. Both companies are obligated to follow the decision, resolving the dispute without the need for a lengthy legal process.
In another case, a landlord and a tenant may use an external arbitration procedure to settle a disagreement over the terms of a lease. They agree to have the matter resolved by a neutral third-party arbitrator instead of taking the issue to court, saving time and legal expenses.
An example of an external arbitration procedures clause
Here’s how a clause about external arbitration procedures might appear in a contract:
“Any dispute arising out of or relating to this Agreement shall be resolved through external arbitration administered by [insert arbitration body], in accordance with the rules of [insert rules]. The decision of the arbitrator shall be binding on both parties.”
Conclusion
External arbitration procedures offer a practical and efficient method for resolving disputes outside of the courtroom. They provide a neutral, specialized forum for dispute resolution and can be faster and more cost-effective than traditional litigation. By agreeing to external arbitration, parties can avoid lengthy legal battles while ensuring that their issues are addressed fairly and efficiently.
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.