April 2021 – Law and Civil Engineering

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The Broad Powers of an Arbitrator
by Eugene Bass

Arbitrators do not have to be lawyers. In fact, even though the purpose of an arbitration may be to determination of the rights of the parties under a contract, an arbitrator may decide the issues with no knowledge of the legal principals that would govern in a trial before a judge or jury.

Arbitration awards sometimes violate the rules of law and would be overturned on appeal if they were the result of a court or jury trial. Unless the arbitration agreement of the parties specifically provides for judicial review for errors of law, arbitration awards may be vacated, only upon very limited grounds. The grounds include, (1) that the award was procured by corruption, fraud or other undue means; (2) that there was corruption in any of the arbitrators; (3) that the rights of a party were substantially prejudiced by misconduct of a neutral arbitrator; (4) that the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted; or (5) that the rights of a party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to arbitration statutes laws of the state; (6) An arbitrator making the award either failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware or was subject to disqualification upon grounds specified by law but failed upon receipt of timely demand to disqualify himself or herself as required. In addition, an award may be corrected if the court determines that there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award.

The finality of the arbitration award and the limited basis for appeal is intentional. The courts have held that finality attaches to arbitration awards because there is a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of resolving disputes. Also, the parties to a private arbitration either expressly or impliedly agree that the arbitrator’s decision will be final and binding. The courts have also stated that an arbitrator is not constrained to decide a case based on rules of law, unless the arbitration agreement provides otherwise, and instead may decide on principles of equity and good conscience. The remedy or relief must be within the scope of the agreement of the parties, however.

The courts have recognized that there is a risk that the arbitrator will make a mistake. By voluntarily submitting to arbitration, the parties have agreed to bear that risk in return for a quick, inexpensive, and conclusive resolution to their dispute. “The parties to an arbitral agreement knowingly take the risks of error of fact or law committed by the arbitrators and that this is a worthy ‘trade-off’ in order to obtain speedy decisions by experts in the field whose practical experience and worldly reasoning will be accepted as correct by other experts.”

Because of the nature of arbitration is very important to select an arbitrator who will be knowledgeable and fair in deciding the issues in dispute.

This article is intended only to provide general information regarding legal issues. It is not to be relied upon for legal advice. Contact your attorney for advise and guidance on general and specific legal issues.

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