Arbitration is a process for resolving legal disputes by recourse to a neutral third party tribunal chosen by the parties in dispute. An arbitration tribunal consists of either a single arbitrator or an arbitration board comprising a nominee of each of the parties and a neutral chair or umpire selected by agreement of the nominees. In contrast to the courts, whose jurisdiction to resolve legal disputes arises by operation of law independent of the desires of one or the other of the parties, the jurisdiction of an arbitration tribunal is consensually based. However, in certain circumstances the law requires that disputes be submitted to arbitration rather than to the courts for resolution.
The cost of the arbitration process and in particular the costs of the arbitration tribunal are shared equally by the parties, whereas the government underwrites the cost of the judicial process. Arbitration tribunals are selected largely on the basis of expertise and experience in a particular field (eg, commercial relations, labour relations or international relations), whereas judges in the Canadian judicial system are generalists with a broad expertise to apply principles of law across the entire spectrum of social, economic and political activities, whether in the civil or the criminal sphere.
In the commercial sphere, arbitration acts, found in every Canadian jurisdiction, govern the arbitration process and give legal effect to agreements between parties to submit any contractual dispute to arbitration rather than to the ordinary courts for binding determination. The parties may agree not only on the arbitration process, but on the legal system or principles which will be applied by the arbitration tribunal. Any commercial contact may provide for resolution of disputes arising under it by arbitration, but arbitration clauses are common only in certain sectors; building construction and shipping. Commercial arbitration decisions are final and binding on the parties, and not subject to appeal. However, arbitration decisions may be reviewed by courts to ensure that they have been reached in conformity with the principles of administrative law, and if not, they may be struck down. In recent years, Canadian jurisdictions have introduced special statutes to govern international commercial arbitration between parties whose commercial relationship arises in one or more foreign jurisdictions.
Recourse to Rights
In Canada, recourse to rights or "grievance arbitration" is mandatory for the resolution of all disputes arising under a collective agreement and courts have no jurisdiction to entertain such matters. This stems from an earlier period when collective agreements were not recognized as having binding legal effect, and trade unions were not given status as persons for the purposes of the law (see Labour Law). In Canada, grievance arbitration replaces the strike as an instrument of grievance resolution and strikes are prohibited during the term of a collective agreement. Recently, parties have engaged in Med-Arb, a process which combines labour mediation with arbitration, an arbitrator being asked first to mediate a dispute, failing which he or she arbitrates.
Interest arbitration is a process for determining the terms of a collective agreement between bargaining parties, rather than allowing them to have recourse to economic sanction by way of strike or lockout. It is common in those components of the public sector which are deemed essential, such as police, firemen and health care workers. Where, because of unacceptable injury to the public interest, an ongoing strike or lockout in either the private or the public sector is prohibited by back to work legislation (see Strikes and Lockouts), interest arbitration is legislatively imposed on the parties. Traditionally, the interest arbitration tribunal is given a wide latitude in imposing the terms of a collective agreement, which are intended to replicate the outcome had the parties resolved their dispute directly.
More recently, legislators have given direction to arbitration tribunals based on broader public fiscal and budgetary policy. In final offer arbitration, the discretion of the interest arbitration tribunal is limited to selecting the proposals put forward by one or the other of the parties, whether as a package on all issues outstanding between them or on an issue-by-issue basis. Both grievance and interest arbitration awards are final and not subject to review by the courts except on narrow grounds in accordance with the principles of administrative law.
Arbitration is a common method for the peaceful resolution of disputes between states arising under treaty and other agreements, or otherwise. It has been a common feature of Western political trading since the time of the Greek city states, and in modern times is a principal instrument for the resolution of disputes in the international arena. There is no international judicial tribunal with an inherent jurisdiction to resolve disputes between states, and it is for this reason that recourse is made available to the arbitration mechanism. Permanent tribunals such as the International Court of Justice at the Hague, established under the United Nations Charter, function in a manner analogous to arbitration tribunals. The international court has jurisdiction only on consent of the disputing parties, each of whom may appoint ad hoc judges to sit with the permanent members of the court in resolving a particular dispute.
See also Strikes and Lockouts; Labour Law.