A “one-shot” form of dispute resolution, arbitration is usually faster and cheaper than litigation. In addition, rather than being assigned a judge, parties are able to select their arbitrator. Here are some examples of types of arbitration dispute resolution professionals typically employ.
1. Hi-lo arbitration.
In this type of arbitration, parties attempt to reduce the risk of extreme decisions by agreeing beforehand on the upper and lower limits of any monetary award. This strategy limits the risk to parties who are worried about giving carte blanche to an arbitrator.
2. Final offer, or baseball, arbitration.
Here, both parties present a last best offer to the arbitrator, who must choose one or the other. Because this form of arbitration gives each party an incentive to come up with the most reasonable offer, it maximizes the disputants’ participation while still ensuring a decision if they are unable to agree. This type of arbitration is often used in the bargaining process of setting wages for police officers and firefighters, because communities cannot tolerate the risk of a strike arising from an impasse with such essential employees.
3. Tripartite arbitration.
In this form of arbitration, there are three arbitrators, one named by each party and one chosen by both of them. This form is useful in highly complex cases where the parties want advice from three individuals with differing expertise (such as a lawyer, a businessperson, and a scientist) and in cases in which the parties lack full confidence in a neutral arbitrator and prefer an arbitrator who will forcefully represent their interests.
Adapted from “How to Break a Stalemate,” by Frank E. A. Sander (Professor Emeritus, Harvard Law School), first published in the Negotiation newsletter.
Originally published December 2010.