Volume 24, Issue Number 4, Summer 2019
Specific Legal Issues

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What is Arbitration?

Whenever I am Asked to Explain Arbitration, I Start With Judge Judy

By Marc Bhalla | Other articles by Marc Bhalla

Most of us are familiar with the no-nonsense, popular television judge who conducts trial-like proceedings and renders binding decisions upon those who dare to come before her.

Arbitration is like Judge Judy, only with the cameras off.

Private Court

Unlike participating in a legal proceeding that takes place in the public realm, arbitration is private. This can be appealing to those who may not want to air their dirty laundry in public.

We find arbitration clauses in service contracts for that very reason. While it may be obvious why those servicing the condominium industry would want to keep the details of their disputes private, this often appeals to condominium corporations as well for reasons that range from avoiding the arbitration award “setting a precedent” within the community, to the comfort of avoiding the negative publicity a community can receive from details of their case being circulated on social media, discussed in blogs and debated at conferences.

Operating “in the shadow of the law” is not the only advantage of arbitration. Let’s return to the Judge Judy analogy to explore further…

Choice of Adjudicator

When you go to court, you have no control over which adjudicator is assigned to your case. They may have familiarity with the subject matter of your dispute, they may not. It is entirely luck of the draw.

When you go to Judge Judy, you get Judge Judy.

The ability to select your own adjudicator is a major advantage of arbitration. When it comes to condominium disputes, there is undoubtedly merit in involving someone with understanding of the context of the conflict. The nuances of how condominiums work and how the law applies to them can be complex and difficult to understand for someone who is not familiar - particularly someone who does not have a practical grasp on condominium living to allow for empathy with those experiencing an issue.

That being said, it can be dangerous to consider only subject matter expertise in selecting an arbitrator, as it is important that your arbitrator be qualified to arbitrate. Arbitration is an unregulated profession. Organizations such as the Alternative Dispute Resolution (ADR) Institute of Canada (locally) and the Chartered Institute of Arbitrators (internationally) bestow designations upon arbitrators sufficiently trained, skilled and experienced to arbitrate.

Tip: Arbitration designations offered by the ADR Institute of Canada also require that arbitrators carry insurance. Beyond qualification, it is wise to verify that your arbitrator is insured to arbitrate.

These designations provide assurances as to an arbitrator’s credentials and are often included in the criteria for selecting an arbitrator that can be found within agreements or condominium by-laws outlining the arbitration process. Even when not expressly required, third-party designations of this nature can offer a neutral measuring stick to confirm an arbitrator’s qualification.

Time and Cost Savings

Arbitration is more flexible than court. It can be designed to better suit those involved in a dispute, such as by accommodating schedules and participation preferences. It is not uncommon for arbitration proceedings to take place outside of traditional court hours and platforms, including online, and in ways that reduce rigidity, process delay and complication. Some go so far as to factor arbitrator availability into the selection process for assurance that the matter will conclude on a timely basis.

Tip: If timing is important, seek out an arbitrator who will guarantee the timing of their award delivery and consider including this in the Arbitration Agreement (perhaps even with a financial deterrent for the arbitrator being late). Many arbitrators will share the anticipated timing of their award at the conclusion of the hearing, though without greater incentive this can get delayed if they get busy or if coming to a decision proves to be challenging for them. While it is best to allow your arbitrator to take the time that they need to come to their decision, when timing of closure is significant, it is important for this to be clear from the start.

With respect to costs, some hesitate at the notion that arbitration can be cheaper than going to court. After all, when you go to court, tax payers cover the cost of the adjudicator, hearing space and administration; in contrast, these are all costs borne directly by the parties in arbitration.

The aforementioned process flexibility can allow for arbitration to be more focused and less time consuming, which can serve to reduce costs. The greatest cost savings, however, is not offered through process as much as through outcome.

Arbitration offers closure in a way that courts cannot. Appeal rights can delay finality while arbitration awards tend to be more difficult to appeal, particularly as the parties to an arbitration have chosen their decision maker. Have you ever heard of anyone appealing a Judge Judy decision?

Limited appeal rights can be written into arbitration agreements to significantly narrow the ability to appeal the arbitrator’s award. Obtaining a clear sense of closure can be especially valuable for parties facing the stress and uncertainty that comes with conflict, particularly for those that remain in community throughout it, as is so often the case in condominiums.

Additionally, there is the notion that to truly succeed in court, you have to win twice – once with your legal arguments and once again when it comes to cost recovery. Otherwise, a win in court can come at great expense to the winner. It is not uncommon in this day and age for successful litigants to fail to recover a substantial portion of their legal costs. As arbitrators do not have the same limitations as judges do when it comes to awarding costs, arbitration awards can be more favourable when it comes to cost recovery. An arbitrator willing to allow for substantial cost recovery can make participating in the process significantly less expensive for the successful party.

What Does the Arbitrator Do, Exactly, and How?

The arbitrator’s role is to govern the process. Like Judge Judy, the arbitrator will direct who makes submissions and when, what will be accepted as evidence and may ask questions of the participants to better understand the facts and positions being put forward. The arbitrator will then make an award to decide the matter.

Arbitration is a private legal process that empowers a third party to make a binding decision for you. While some arbitrators are lawyers, there is a significant difference between what makes someone a good arbitrator and what makes someone a good lawyer. Thus, a law degree should not be equated to an official arbitration designation.

An arbitrator is a neutral and impartial third party who should enter an arbitration with no pre-conceived notions of the outcome of the case. The arbitrator should start with a blank slate and open mind, taking in the submissions presented to them and weighing such to come to a fair and reasonable conclusion.

An arbitration award is not a legal opinion. A legal opinion involves a lawyer doing the “dirty work” of researching the issues, relevant case law and legislation and offering their view based upon their findings. An arbitration award is a decision made based upon the submissions made to the arbitrator. It involves a very different mindset and approach.

Tip: Not all arbitration awards are alike. Some arbitrators offer little to no reasoning for their decision to keep the cost of their involvement lower and to further limit appeal rights. Others insist on providing their reasoning to offer insights into why they came to their decision, which may CV also be helpful if the award is appealed. If the type of award provided is important to you, clarify this at the arbitrator selection phase. Different arbitrators have different approaches and some are more flexible than others.

Arbitration exists for those who want their day in court but perhaps do not appreciate the delay, formality and public nature of engaging the formal court system. While arbitration is sometimes required by contract or applicable legislation, it can take place on a voluntary basis, as a choice of the parties to receive the advantages that come with it.

Arbitration has an important place in the course of addressing condominium conflict. It is prescribed by law and is increasingly selected by choice (contractually or otherwise) because it offers closure on a faster, less costly, less rigid and less complicated basis than court.

While my Judge Judy analogy may have helped explain what arbitration is and how it works, it has limits… you should not expect your arbitrator to dress in robes like Judge Judy!