Arbitration Agreements: Important Considerations
Arbitration, a process by which an independent individual is appointed by the parties to make a binding decision on issues in dispute, is a great option for parties who wish to avoid court and the associated expense, uncertainty and publicity. The first essential step in an arbitration process is entering into the arbitration agreement, a contract by which the parties and the individual appointed as arbitrator agree to several essential elements of the arbitration process. The following are some of the important sections of an Arbitration Agreement that should be thoughtfully considered prior to signing:
The parties to the arbitration – This may seem obvious, however, there are situations that arise in a family law context when there is a need to add third parties to the dispute. One example is where a party has transferred assets to an individual to defeat a property claim. Another is where a party has intertwined their financial affairs with a new spouse or relative in such a manner that it would be impossible to determine the party’s means and circumstances without having access to that individual’s finances as well. In a court proceeding, an application could be made to have the individual added as a party, however, in the arbitration context which is governed by a private contract, the third party can not be bound without the consent of the third party as well as the parties to the existing contract.
The jurisdiction of the arbitrator – The arbitrator only has jurisdiction to determine those issues specifically referred to them in the agreement and the scope of that jurisdiction can only be widened or limited by consent after the agreement has been signed. It is therefore important to ensure that all parties have a full understanding and clearly set out in the agreement which issues the arbitrator will have the power to decide.
The right of appeal from the arbitrator’s decision – The point, for most, in entering an arbitration process is to avoid court proceedings and therefore it may be difficult to envision a situation whereby the recourse of the court is required. However, the possibility that the decision of the arbitrator may need to be appealed should not be overlooked. Given that it is a private contract, the parties may set out on which grounds an appeal of the arbitrator’s decision to court will be allowed – on a question of law, a question of fact, a question of mixed fact and law, or not at all. The parties can also agree that any appeal will be made pursuant to the Arbitration Act which provides that a party may, with the permission of the court, appeal an award to the court on a question of law, with permission only being granted upon certain criteria being met.
More information regarding arbitration and other forms of alternative dispute resolution can be found on our website.