Compulsory arbitration is a legal requirement for resolving disputes outside of court. It is often used in commercial agreements and employee-employer disputes to save time and money. In some cases, it is mandatory and binding, with the arbitrator’s decision being final.
Compulsory arbitration is an alternative dispute resolution system that is required by law in the public interest or by contract between the parties. Under this system, parties to a dispute must refer the matter to an independent arbitrator for resolution, rather than taking the matter to court. Typically, binding arbitration is non-binding and either party can override the arbitrator’s decision and take the matter to court. In some cases, the law makes binding arbitration mandatory, and both parties must comply with the arbitrator’s decision without recourse to the court system.
Arbitration is a faster and more cost-effective alternative to the court system. In many jurisdictions, the court system is overloaded and cases can take years to reach a conclusion. Alternative dispute resolution options, such as arbitration, give parties to a lawsuit a method of resolving the issue using an independent arbitrator acting in place of a judge. This option solves the problem in months instead of years.
In commercial agreements, arbitration is usually an option that the parties agree to in advance in case there is a dispute over the terms of the contract in the future. The freedom for a judge to be tried by a judge is a fundamental democratic right that is often guaranteed by a country’s constitution. A person or entity can agree to waive this right, but it typically cannot be withdrawn without cause.
There are certain exceptions to the right to have a dispute heard in court. A jurisdiction may determine that protracted litigation is contrary to the public interest in special circumstances and may require the use of arbitration to resolve disputes. Compulsory arbitration is often required by law in employee-employer disputes where a strike or lockout would impact public safety.
For example, the law in many jurisdictions requires law enforcement officers, medical professionals, transit workers and airline pilots to submit their employment disputes to binding arbitration. A disruption to work in any of these areas would have a catastrophic impact on the public and the economy. One of the working conditions in these industries is having to waive certain fundamental labor rights.
When binding arbitration is mandated by contract between the parties, it is normally not binding. If either party disagrees with the arbitrator’s decision, the matter may be taken to court. On the other hand, mandatory arbitration required by law in the public interest is often binding. It is the only option to resolve the issue, and the referee’s decision is final.
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