Arbitration is an increasingly popular alternate means of dispute resolution. Instead of resolving a legal claim through the court system and having a judge or jury decide, the parties have the dispute decided privately. An arbitrator, or a panel of arbitrators, acts as judge and jury and decides the outcome of the case. This method is normally faster and less expensive than having a trial, but it also can add some extra hoops to jump through.
Unlike a judgment obtained during court proceedings, an arbitration award is not directly enforceable. It needs to be confirmed (or vacated if the losing party successfully challenges it) by court proceedings before it can be enforced.
- If a petition is properly served and filed after an arbitration award has been rendered, the court will confirm the award as made, or, pursuant to applicable laws, it will correct the award and confirm it, vacate the award or dismiss the proceeding.
- Changing or dismissing an arbitration ruling is rare. Under the law every presumption in favor of the validity of arbitration award is given. If a party claims the award is not valid, it carries the burden of proof.
- A court won’t look into whether there was sufficient evidence to support the award or if the arbitrator’s reasoning was valid. Alleged errors of law by the arbitrator also won’t be reviewed. The losing party could claim that fraud, corruption or misconduct by the arbitrator(s), but that would be extremely difficult to prove.
- Despite the vast space arbitrators are allowed to work in, they cannot completely make things up. They cannot exceed their powers by making decisions and awarding damages that are not authorized by law.
If the arbitration award is confirmed it has the same legal weight as a decision by a judge or jury and can be enforced in the same manner.
- There is time, if the successful party wishes, to negotiate a settlement of the claim before it needs to go to court to confirm the arbitration award.
- The party trying to enforce the arbitration decision and seeking to confirm the award must file a petition not later than four years after the date of service of a signed copy of the award on petitioner.
- Even if there is an agreement, it may be a good idea to confirm the award to prevent the other party from later bringing claims that were not addressed in the arbitration.
If the arbitration is held outside California, the confirmation can be made by a court where the losing party resides or has a place of business.
American businesses, especially those in California, depend on relationships with businesses and suppliers in other countries. The state’s economy is tightly bound to Mexico, the many countries of Asia and Canada. If there are legal disputes with a business partner or supplier outside the U.S., is arbitration an option? Can an arbitration award made in another country be confirmed in a California court and enforced here? We’ll discuss that in the next blog.
If your business has a legal dispute with another business or an individual and you have questions about arbitration, contact my office so we can talk about the situation, what laws may have been broken and whether arbitration may be a good choice for your business.