You are on page 1of 3

TASK : According to Oxford dictionary, Arbitration is commonly known as Alternative Dispute Resolution (ADR).

It's a process where both sides come together and agree to follow and respect the decision of the arbitrator. The arbitrator is usually an attorney familiar with the field of law being decided. The decision of the arbitrator is legally binding against both parties.In other hand, an arbitration clause is a written provision in a contract which states that all disputes between parties will be settled through the process of arbitration, rather than in the courts. Arbitration clauses are included in many business and commercial contracts, as well as contracts with individuals. Businesses include arbitration clauses in contracts with individuals because it allows them to settle disputes quickly and quietly, without going through the often expensive and timeconsuming legal system. By resolving problems through arbitration, businesses feel that they can save time and money. Businesses also prefer arbitration because it allows them to select neutral decision makers who often specialize in that field. In this sample, we can see that Raytech company using arbitration clauses in their business. In my opinion, the court should be enforcing arbitration clauses. This is because The Federal Arbitration Act creates a strong national policy in favor of enforcing arbitration clauses. The
Act states that arbitration clauses will be enforced in all cases where there is a maritime transaction, or where a contract involves a transaction crossing state line.

However, in cases where the Federal Arbitration Act does not apply, State law determines whether the arbitration clause is enforceable. For example, some courts require that there be a contract for interstate commerce for the Federal Arbitration Act to apply. Thus, if a contract is not covered by the Federal Arbitration Act, State law will determine whether the arbitration clause is enforceable. Unlike a court ruling, a binding arbitration ruling can't be appealed. It can be set aside only if a party can prove that the arbitrator was biased or that the arbitrator's decision violated public policy. Unlike a court case, there is no automatic right to discovery (the process by which the parties have to disclose information about their cases to the other party). (However, you can include a requirement for discovery in your arbitration clause or agree to it under arbitration rules.) The costs of arbitration can be significant; in some cases, they may even exceed the costs of litigation

As a means of resolving disputes, arbitration has a number of advantages over litigation in the court system. It is almost always faster in reaching a conclusion and there are much more limited grounds for appeal - thereby more rapidly putting an end to the uncertainty over the outcome and putting money into the pockets of those entitled to recover. The less time spent by company executives on litigation, the more time is available to attend to their real jobs. The informality of the procedures results in reduced attorneys fees and other expenses, makes it easier to put on evidence, and avoids the potential for randomness and misconduct which occasionally influence jury awards. Arbitrators are usually selected by mutual agreement from a roster of experienced judges, attorneys or experts with particularly appropriate backgrounds in the areas of law or business that are in dispute between the parties. While arbitrators do not work for free, the savings in other areas is generally well worth the expense of the arbitrator which is generally shared by the parties to commercial contracts.

Not surprisingly, legislation at both the state and federal levels strongly support the arbitration of disputes, not only for the benefits to the parties but for the savings to their overburdened court systems. Attorneys nearly universally recommend the inclusion of arbitration clauses in commercial contracts and most form contracts used in business contain such clauses.

However, the courts, particularly those in California, have long been reluctant to enforce arbitration clauses. In decision after decision, California courts have rejected arbitration clauses for one reason or another on the grounds that they were (in one manner or another) "unconscionable." In 2011, the United States Supreme Court issued its decision in AT&T Mobility v. Concepcion, strongly supporting arbitration clauses containing class action waivers. It held that state laws (or judicial policies based on state laws) which ban enforcement of arbitration clauses requiring that arbitrations proceed on an individual basis - thereby preventing "class action" treatment of disputes - could not be used to defeat arbitration clauses in contracts. In doing so, California courts violated the Federal Arbitration Act ("FAA"). California laws and policies had long been used to do just that, even though California law specifically provides that arbitration clauses are favored.

"The overarching purpose of the FAA... is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings."

AT&T

Mobility

v.

Concepcion,

131

S.Ct.

1740,

1749

(2011).

Concepcion was widely seen as a major victory for businesses which rely upon arbitration clauses to keep their litigation costs down. California business owners are well acquainted with how class action litigation can turn even small individual disputes into massive litigation actions involving hundreds, thousands or more parties. The settlement of class action claims frequently involves payments of millions of dollars in attorneys' fees, as well as millions of dollars in damages. The supposed "beneficiaries" of such actions frequently end up with recoveries in the hundreds of dollars (or even much less - many settlements involve nothing more than coupons or discounts on future purchases), while the well-paid lawyers immediately turn to their next targeted company. Meanwhile, companies are destroyed or crippled into halting expansion plans, cutting back on employees, etc.

While Concepcion was widely hailed by businesses, and rightfully so, the path for businesses seeking to enforce arbitration clauses has not been smooth. While many courts have applied the language of the Concepcion decision broadly to other "unconscionability" claims raised to defeat contractual arbitration clauses, others have not. Courts have issued rulings directly at odds over the extent to which the prior law and "policy" has been overruled by Concepcion. While Concepcion has provided strong language from the highest court in the country, it remains to be seen whether the end result will be a major change in the way that other courts approach arbitration clauses.

In the meantime, what is a business owner to do? The legal landscape is so unsettled that there is no assurance that any arbitration clause will be enforced by all courts in every context. However, many courts are enforcing such agreements. Carefully crafting the terms of your arbitration agreements can make them more (or less) likely to be enforced. Any consideration of the pluses and minuses of various types of arbitration clauses must still also include an analysis of the risk that the clause may not be enforced in various contexts. This risk can go up or down depending upon how clauses are treated by the courts in a particular locality. At the same time, by making the agreement more generally acceptable to certain judges, Raytech company can put their company on the hook for greater damages, expenses, or other exposure.