What Happens if the Arbitration Process Breaks Down?

What happens if you’re involved in a contract dispute and there’s an arbitration clause in the contract? Most people realize that the parties must enter into arbitration. But what if the other party refuses to arbitrate? Or what if you want to enforce the award, modify it or appeal it?

This article addresses these and other questions you may have with regard to arbitration.

What if the Other Party Refuses to Arbitrate?

In most cases, when there is a written agreement to arbitrate, yet one party refuses, another party can petition the court that has jurisdiction to order the arbitration to proceed in a manner provided for in the agreement.

If the court or jury finds the parties never had a written agreement to arbitrate or that there is no default, the court will dismiss the proceeding. If the court or jury finds that there is a written agreement for arbitration and there is a default in proceeding, the court will issue an order directing the parties to proceed with the arbitration, according to the terms of the agreement.

What Happens if a Party Ignores the Arbitration Clause and Files a Lawsuit?

If a matter is brought to court and the court is satisfied that it can be referred to arbitration under a written agreement, the court will “stay” or temporarily stop the trial if one of the parties to the matter requests a stay. The trial will then be stayed until arbitration has been completed according to the written agreement, unless the applicant for the stay is in default regarding the arbitration.

What Happens after There’s an Arbitration Award?

Assume there is agreement among the parties that the court will enter a judgment concerning the award determined in the arbitration. At any time within one year, (usually) after the award is made, any party to the arbitration may apply to the specified court for an order confirming the award. At that point, the court will grant the order, unless the award is vacated, modified or corrected.

If no court is specified in the agreement of the parties, an application may be made in the court that has jurisdiction. After notification of the application, that court will have jurisdiction over such party as though he had appeared generally in the proceeding.

Can I Modify the Award?

In the following cases, generally the court can make an order to modify or correct the award, if any party to the arbitration makes an application requesting this action. The application is to be made in the jurisdiction where the award was made.

• If there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award,
• If the arbitrators have awarded in a matter not submitted to them, unless it is a matter that does not affect the merits of the decision, or
• If the award is imperfect in matter of form that does not affect the merits of the controversy.

The order may modify and correct the award, so as to bring about its intent and promote justice between the parties.

What if I Don’t Like the Award? Can I Appeal It?

In any of the following cases, a court with jurisdiction where the award was made can order the award vacated, if a party to the arbitration applies for such action:

• If the award was procured by corruption, fraud or undue means,
• If there was evident partiality or corruption in the arbitrators,
• If the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence that is pertinent and material to the controversy,
• If there was any other misbehavior that causes the rights of any party to be prejudiced, or
• If the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the submitted subject matter was not made.

If an award is vacated — and the time has not expired in which the award must be made — the court has discretion to direct a rehearing by the arbitrators.

Also, a court could consider an application to vacate the award made by a person who is not a party to the arbitration, if that person is adversely affected or aggrieved by the award, or if the use of arbitration or the award is clearly inconsistent.

Consult with your attorney if you have questions about an arbitration clause or if you are in a middle of a dispute regarding an agreement with an arbitration clause.