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arbitration, industrial, method of settling disputes between two parties by seeking and accepting the decision of a third party. Arbritration differs from mediation in that the arbritrator does not attempt to find a compromise acceptable to the two parties, but decides in favor of one party or the other and awards any damages if appropriate. Arbitration may be voluntarily agreed to by the parties, but it is increasingly mandatory in commercial consumer contracts and employment contracts, for example, as the method for settling disputes, and the decision is often binding on the parties, with limited recourse to appeal or for review of the decision. Arbitration clauses in consumer contracts may specify that the arbitrator base the decision on standard business practice or principles or other guidelines instead of the law, and often require the purchaser of a product or service to waive the right to sue or participate in a class action. In voluntary arbitration a formal agreement is usually made to abide by the decision. The members of organizations such as the American Arbitration Association, founded in 1926, help settle such disputes and the use of such an organization's members may be specified by a contract, but some such groups have been accused of favoring businesses (who typically pay the arbitrator's fees) over consumers.
Arbitration also has been used in employer-employee disputes, particularly those involving labor unions. Such arbitration may be compelled by the government, as in New Zealand (since 1894), Australia (since 1904), Canada (since 1907), Italy (since 1926), and Great Britain (since World War II). In other cases, it may be by voluntary agreement, as is often the case in the United States, where the government occasionally intervenes in the case of a strike affecting the public welfare (see Taft-Hartley Labor Act) by persuading the parties concerned to accept the decision handed down by the arbitrator. In the United States, as a result of a Supreme Court ruling in 2001, companies can insist that employment-related disputes (such as discrimination suits) go to arbitration rather than to court. Labor arbitration machinery in the United States has been set up at both federal and state levels in the form of mediation and arbitration boards.
See F. Elkouri, How Arbitration Works (1985); M. Bognanno, Labor Arbitration in America (1992).
In international arbitration, international disputes, usually between nations, are settled peacefully through a judicial process, generally through the use of a tribunal acting as a court of law. Such a tribunal may consist of an individual (e.g., an impartial head of state, the pope, the secretary-general of the United Nations), a neutral country, or an organization such as the Hague Tribunal. The parties to the dispute pick the arbitrating body themselves and are obligated to accept the terms of settlement. If the parties do not agree in advance to follow the decision reached by a third party, but merely agree to consider it, the process is termed conciliation (see mediation).
Arbitration was practiced by the Greek city-states, and in the Middle Ages high ecclesiastical authorities were called upon to settle controversies. With the development of the modern system of nation-states, however, arbitration was less frequently used until the 19th cent. when the settlement by arbitration of the famous Alabama claims case between the United States and Great Britain brought this practice back into general use. Great advances have been made since then, most notably in the establishment of a Permanent Court of Arbitration (the Hague Tribunal) by the Hague Conferences. Functions analogous to arbitration were performed by the Permanent Court of International Justice (see World Court) under the League of Nations and have now been transferred to its successor, the International Court of Justice. Today many treaties contain clauses providing for arbitration or conciliation of disputes; the most notable of these is the Charter of the United Nations (Article 33).
See J. H. Ralston, International Arbitration from Athens to Locarno (1929); C. M. Bishop, International Arbitral Procedure (1930); K. S. Carlston, The Process of International Arbitration (1946); H. W. Briggs, The Law of Nations (2d ed. 1952); J. L. Brierly, The Law of Nations (6th ed. 1963); A. Cox, Prospects for Peacekeeping (1967); R. Fisher, Improving Compliance with International Law (1981).
- (ANTHROPOLOGY) an arrangement, especially in stateless societies, for settling conflicts and disputes between two parties by reference to a third party who acts as arbiter. Whilst the arbiter generally has little or no ability to enforce a judgement, it is frequently the case that the disputants agree in advance to abide by the arbiter's ruling. For example, among the Nuer, the Leopard Skin Chief acts as an arbiter in this way – see EVANS-PRITCHARD (1940), GELLNER (1969).
- (industrial relations) see ARBITRATION AND CONCILIATION.
(1) A means of resolving disputes in which the disputants appeal not to judicial bodies but to individuals who are called arbiters or to a court of arbitration. The arbiters are selected by the disputants themselves or are appointed according to the procedure determined in their agreement or established by law. Arbitration is used primarily to resolve disputes over property which arise during the course of commercial operations, in making commercial shipments, in the delivery of goods, and so forth.
(2) A special organ—arbitration tribunal—for resolving disputes over property and related disputes not involving property. Two types are usually distinguished: the incidental (or isolated ) arbitration tribunal and the constantly functioning, or permanent, tribunal. The incidental, or isolated, tribunal, or court of arbitration, is only for resolving a particular case. Its composition is determined by agreement between the disputants or by a procedure established by them. This was the first type of arbitration tribunal to appear in history, originating in the Middle Ages. However, in the 19th and 20th centuries the permanent tribunal has taken precedence; this reviews all disputes brought before it for consideration which involve questions that come under its jurisdiction. A permanent arbitration tribunal is set up by chambers of commerce, government bodies, various associations, and so forth and is chosen from among persons who are included, either for a certain length of time or indefinitely, on a list of arbitrators. This list is drawn up by the governing body of the organization to which the arbitration tribunal is attached. If a permanent arbitration tribunal is appointed to resolve disputes between any parties who wish to bring their cases to it, it is classified as an open arbitration tribunal. However, if the tribunal can resolve disputes only between members of the corresponding organization (or association or system of organizations), it is considered a closed arbitration tribunal.
One type of arbitration tribunal is the so-called international one, in which the disputant parties are as a rule juridical or physical persons from different countries, but sometimes are governments directly represented in the form of one or another governmental body. For example, in the USSR there are two international arbitration tribunals in operation: the Maritime Arbitration Commission (MAK) and the Foreign Trade Arbitration Commission (VTAK), which are attached to the All-Union Chamber of Commerce and Industry. In the USSR two types of national arbitration tribunals function (that is, tribunals which resolve disputes between parties within the country): government and institutional. Soviet arbitration tribunals were established after the end of the Civil War, when the economic activity of state enterprises began to be arranged on the basis of economic accounting in connection with the transition to the New Economic Policy.
In 1922 state and departmental arbitration commissions were established, but these were later abolished. On the basis of a decree by the Council of People’s Commissars of the USSR of Mar. 20, 1931, entitled “On Changes in the System of Credit, the Strengthening of Work in the Area of Credit, and the Ensuring of Economic Accounting in All Economic Bodies” (SZ SSSR, 1931, no. 18, p. 166), organs of state arbitration were reestablished. These have functioned until the present time.
The present system of state arbitration tribunals includes the State Arbitration Tribunal of the USSR under the Council of Ministers of the USSR, and state arbitration tribunals attached to the councils of ministers of the Union republics, to the councils of ministers of the autonomous republics, and to the executive committees of soviets of working people’s deputies on the oblast and krai levels and on the city levels in Moscow and Leningrad. Each of these types of arbitration tribunal is subordinate only to that government administrative body to which it is attached and under whose direct supervision it functions. The procedures for the functioning of state arbitration tribunals are determined by special statutes adopted by the appropriate councils of ministers and by regulations published by the State Arbitration Tribunal which is attached to the Council of Ministers of the USSR. Cases put before state arbitration tribunals are decided by an arbitrator, with the participation of responsible representatives of the disputants. Decisions go into effect immediately; as a rule, they are put into effect by the disputants themselves within a period of time set by the arbitration tribunal.
The activity of the state arbitration tribunals acquired special significance in light of the economic reforms introduced in the USSR beginning in 1965 in connection with the transition of the national economy to a new system of planning and economic incentives. Under the new system the basic indicators for the work of an enterprise or organization became the volume of marketed output, profit, economically efficient fulfillment of assignments for the most important types of output, and the meeting of demands regarding the quality of output.
In reviewing disputes which arise between parties in concluding contracts and meeting contractual obligations, the state arbitration tribunals take measures to ensure the interests of the state and the economic accounting interests of the parties, and they apply pressure on the enterprises and economic organizations to encourage the timely and proper fulfillment of the tasks before them. The tribunals also help to eliminate shortcomings in the functioning of the enterprises and economic organizations which are revealed in the course of investigation into disputes and report on these shortcomings to those bodies to which the disputants are subordinate and, in appropriate cases, to the organs of the attorney’s office.
The work of institutional arbitration tribunals proceeds from the same principles as those of state arbitration tribunals. Institutional tribunals are established at ministries and agencies (central institutions and cooperative centers) for resolving economic disputes between enterprises, organizations, and institutions subordinate to the given bodies. The institutional arbitration tribunal is usually organized as a part of the apparatus of the above-stated bodies.
V. N. ERSHOV