Arbitration is the adjudication by private persons appointed to decide a matter or matters in controversy, on a reference made to them for that purpose, either by agreement of the disputants, or by the order, or on the suggestion, of a court of law. The proceeding generally is called a submission to arbitration, or reference; the parties appointed to decide are termed arbitrators or referees; and their adjudication is called an award. This mode of settling disputes is not only frequently resorted to by litigants themselves, who are anxious to avoid the delay and expense of proceedings in the public tribunals, but the Statute-book bears witness to the approval of it by the legislature at various times. An old act, the 9 and 10 Will. III. chap. 15, attests the benefits of arbitration in strong terms, and it proceeds to authorise and encourage merchants, traders, and others to put an end to their controversies and quarrels by means of arbitration; and an act of 1833 contains still more anxious provisions for rendering references to arbitration effectual. Since that act was passed, the practice and feeling in favour of arbitration has increased, so much so that there are recent statutes which contain provisions rendering arbitration, or private reference in certain cases, compulsory. The Railway Acts of 1845, the Public Health Act of 1848, Common Law Procedure Act of 1854, and Judicature Act, 1873, are modern examples of this legislation. Masters and workmen are specially empowered by an act of 1825, amended in 1872, to refer disputes to arbitration.
The matters that may be determined by an arbi- trator are all personal disputes and differences which might otherwise be made the subject of controversy in the courts of civil jurisdiction. Thus breaches of contracts generally, breaches of promises of marriage, trespass, assaults, charges of slander, differences respecting partnership transactions or the purchase price of property, and questions relating to tolls or the right to titles, may all be referred to arbitration. Questions relating to real property may also be referred, such as those relating to the partition of lands of joint tenants or tenants in common, to settlements of disputed boundaries—to differences between landlord and tenant respecting waste—and to the title to land. Pure questions of law may also be referred to the decision of an arbitrator. An arbitrator may have, therefore, to determine the liability of a party on a promissory-note or bill of exchange, or to construe an act of parliament, or to give a judicial opinion on the effect of a will or deed. Actions at law, and suits in equity, may also be settled by arbitration; and this kind of reference may be made at any stage of the proceedings, sometimes even after verdict, and probably by analogy, after decree in equity. Questions relating to the future use and enjoyment of property, and future or anticipated differences between parties, may likewise be referred. Trade disputes between employers and workmen are now frequently referred to arbitrators.
A matter clearly illegal, or contrary to public policy, cannot be made the subject of a valid reference. But where transactions between parties have been brought to a close by a general award, apparently good, the courts have refused to reopen them on a suggestion that some illegal item has been admitted in account. Among the questions that cannot be referred to arbitration are matters arising out of the administration of the criminal law in the case of felonies. Felonies and offences of a public nature cannot be referred, because the public safety and good require them to be punished, and for this purpose they can only be properly tried in one of the ordinary courts of the country.
There are certain matters which are specially referred to arbitration by statute. Besides those we have already alluded to, the following matters are all referable to arbitration: Questions relating to the expenses of prisoners, under the Prisons Acts, 1865 and 1877; to municipal corporations in England and Wales, under the Municipal Corporations Act, 1882; to savings-banks, under the 26 and 27 Vict. chap. 87; to episcopal and caputular estates, under the acts of 1832 and 1854; to the conveyance of mails by railways, under the 1 and 2 Vict. chap. 98; to insolvents and to insolvency, bankruptcy, and execution, under the Bankruptcy Act, 1883; to companies incorporated for carrying on public undertakings, and to the taking of lands for undertakings of a public nature, under the Consolidation Acts of 1845; to the metropolitan sewers, under the Metropolis Management Acts; and to friendly societies.
Under these acts of parliament, the class of cases which may, or which must, be referred to arbitration has been greatly enlarged. The Railway Acts, in particular, have largely contributed to this kind of amicable determination, although the parties in such cases cannot be said to have much discretion in the matter.
But there are certain misdemeanours which may be either settled by agreement or by means of an arbitration, on a principle of very general application stated by Chief-justice Gibbs—that where there is a remedy, by action as well as by indictment, a reference of the matter in controversy is good. And in these cases of misdemeanour, a compromise or settlement under a reference may be made, even after conviction, but with the sanction of the court.
As to the parties who may make a reference to arbitration, it may be stated generally, that every one capable of making a disposition of his property or release of his rights may make a submission to an award, and in this category may be placed a married woman who has property for her separate use, and there are even cases where a reference between a husband and wife has been held valid; and of course a husband may submit to arbitration differences respecting his wife's personal estate which has not been settled to her separate use.
Respecting the powers of infants or persons under age to submit to arbitration, there are numerous decisions in the courts of law and equity: but they go upon refinements and nice distinctions more suited for the professional lawyer than for the ordinary reader, and we therefore do not think it necessary to give any explanation of them in a popular article such as this professes to be.
Partners and corporations may make references to arbitration on the principles already explained, and according to the relation in which they stand to the matter in dispute.
Those who cannot submit to arbitration are persons in the following position: Persons who cannot contract; married women without any estate settled to their separate use; and along with them, as laid down in old pre-Reformation books, persons professed in religion, and persons under duress. There is an exception to the incapacity of married women to refer to arbitration, where the husband, by exile, banishment, or other cause, is held to be civilly dead, and when he is an alien enemy. To these exceptions it may be added, that in suits respecting the property of charities the Court of Chancery will not permit a reference, however advisable such a course may seem, unless the attorney-general gives his consent.
It has generally been the opinion of the legal profession, and held to be the doctrine of the courts, that a reference by the consent of counsel in a cause is binding on his client; and Lord Chancellor Eldon once said that it was for the counsel to consider whether he was authorised to refer, and if so, he (the chancellor) would act on the consent so given; and the right and privilege of counsel to make a reference has been very strongly laid down in the Scotch courts. But a notable case in the Court of Common Pleas (Swinfen v. Swinfen), where a compromise by counsel was successfully resisted by the client, somewhat unsettled the English law on this subject; and now the feeling of the Bar in England is, that it is unwise to refer or compromise a litigation on the independent authority of counsel.
Submission to reference may also be made by executors and administrators, by trustees, by the committee of a lunatic, and by the officer of a public company, who is authorised by a statute to sue and be sued in the name of the company. And there are persons especially empowered to refer by the statutes which we have already enumerated.
Disputes may be referred to arbitration in any manner that expresses the agreement or understanding of the parties to be bound by the decision of the arbitrator; and for this purpose no formal submission, either verbal or written, is necessary; but the arrangement must be such as manifestly to show an intention to have the difference concluded by a private adjudication in the nature of an award. But where the submission is in writing, it must be executed in due form. A testator, however, cannot exclude his will from litigation by a proviso that all differences respecting it shall be referred to arbitration, although it is thought that the parties benefited by the will might themselves so refer. Generally speaking, it is advantageous to make the arbitration in such a form as that the award may be made a rule of court—that is, may be adopted by a court of law as its judgment on the matter submitted, a proceeding that affords an obvious facility in enforcing the award; and for this purpose it is necessary to make the procedure conformable to the directions of the statutes 9 and 10 Will. III., and 3 and 4 Will. IV., already referred to. Where the submission is merely verbal or constituted by a private bond or deed, it is liable to be capriciously revoked, and the party injured by the revocation has only an equitable claim to compensation.
The arbitrator ought to be a person who stands perfectly indifferent between the disputants; but there are no other particular qualifications for the office. And the choice by parties of the person whom they agree shall decide between them is perfectly free. Some legal writers have even gone so far as to maintain, that not only infants and married women, but even idiots and lunatics, can be arbitrators, on the argument that every person is at liberty to choose whom he likes best for his private judge, and he cannot afterwards object to the deficiencies of those whom he has himself selected. But this, it is clear, is going too far, and the policy of the law would certainly be interposed against such extreme cases. It is better to state the rule to be, that on the condition that the party selected is of ordinary intelligence, the choice of an arbitrator is absolutely unfettered. The only exception to this rule is the case of a party who, by office or position, is the person pointed out for the duty under a reference made by statute. In matters of complicated accounts, mercantile men are generally preferred. In other cases, it is usual to appoint barristers who, being accustomed to judicial investigations, are able to estimate the evidence properly, to confine the examination strictly to the points in question, and, in making the award, to avoid those informalities in respect of which it might afterwards be set aside. Both time and expense are thus saved by fixing on a professional arbitrator. It has, indeed, been wisely remarked, that an arbitrator should endeavour to arrive at his conclusions upon the same rules and principles which would have actuated the court for which he is substituted—a rule of conduct that obviously points to the expediency of a lawyer being the referee. But an arbitrator is not bound by the mere rules of practice which prevail in the ordinary courts of justice, and he has been held justified in allowing interest on both sides of an unliquidated account, although such a determination was against the practice of the Court of Chancery, where the suit, which had been referred, had been commenced.
The proceedings before an arbitrator are regulated according to the peculiar circumstances of the case submitted, but generally it is advisable to conduct them according to the forms observed in courts of law, and they usually are so conducted. Each of the parties furnishes the arbitrator with a statement of his case, and on the day appointed he proceeds to hear them (either in person or by their counsel or attorneys), and to receive the evidence on each side, nearly in the same manner as a judge at an ordinary trial. Having so heard the case, the arbitrator proceeds to make his award, which need not necessarily be in writing, for a verbal award is perfectly valid; but in practice it is usual for the arbitrator to make his award on paper stamped with the proper award stamp, and this he delivers to the successful party. The unsuccessful party gets a copy of the award on unstamped paper. This award in its effect operates as a final and conclusive judgment respecting all the matter submitted, and it binds the rights of the parties for all time.
An award may be set aside on the ground of corruption and fraud in the arbitrator, and for any material irregularity or illegality appearing on the face of the proceedings. But the tendency of the courts is to favour arbitrations and maintain awards, unless such serious grounds as we have referred to can be substantiated.
Where there are two arbitrators, the submission often provides that in the case of their differing in opinion the matter referred shall be decided by a third person, called an umpire, who is generally appointed under a power to that effect, by the arbitrators themselves. But they cannot make such an appointment unless specially authorised so to do by the terms of the submission. This umpire rehears the case, and for this purpose is invested with the same powers as those possessed by the arbitrators, and bound by the same rules.
In Scotland, an arbitration takes place in virtue of a written submission executed by the parties in favour of the chosen referee, who there is called an arbiter, instead of arbitrator as in England; and his award is called a decree-arbitral. This submission is in the form of a regular deed, and is said to be general or special, according to the nature of the matters submitted by it, the submission specifying all the particulars of the reference, and the name of the referee—the arbiter's powers and duties, which, in the ordinary case, are of the most comprehensive character—the specification of the time within which the award or decree-arbitral is to be made—a clause obliging the parties to perform the award under a specified penalty; and other provisions, which are all carefully specified in the submission. The case then proceeds before the arbiter, generally according to the forms observed in the ordinary Scotch courts; and the arbiter makes his award in a very solemn manner, the decree-arbitral commencing with a recital of the submission and of all the procedure—and after stating that the arbiter has ripely considered the whole matter, and has 'God and a good conscience before his eyes,' it gives the arbiter's judgment, and among other things ordains the submission and decree to be recorded according to the clause of registration in the former, and the extract from the registry so made forms a judgment which may be put in execution by either party against the other. The decree-arbitral, like the submission itself, must be executed and attested in the form of a regular deed. Where there are two arbiters, the submission usually provides, that in the event of their differing in opinion, they shall name an umpire or oversman, as he is called in Scotland, whose judgment is final.
In the United States, arbitration is carried out on substantially the same principles as in England. But the several states differ from one another in details. There are state boards of arbitration in some states. From the nature of the case, there can be no appeal to any public tribunal whatever on the merits of a dispute submitted to arbitration. International arbitration has been of late repeatedly had recourse to in matters of debate between nations. Thus, as between Britain and the United States, the San Juan boundary question, the Alabama (q.v.) dispute, and the Behring Strait sealing controversy (1893) were so arranged. The dispute between Spain and Germany as to the Caroline Islands was settled in 1885 by the arbitration of the pope. The London Corporation and the London Chamber of Commerce founded jointly in 1892 a Chamber of Arbitration, or Tribunal of Commerce, for settling trade and commercial difficulties; and the great coal dispute and strike of 1893 led to a conference which secured the foundation of a permanent Board of Conciliation, with representatives of owners and miners. For the French prud'hommes, see FRANCE. Britain agreed to submit to arbitration (1899) its controversy with Venezuela (q.v.); the scheme for settling all difficulties between Britain and the United States (q.v.) failed to pass the senate in 1897; and at the international Peace Conference held on the Russian emperor's suggestion at the Hague in 1899, the main result attained was an agreement on arbitration as an alternative to war—voluntary, not compulsory—and as to the constitution of an international arbitration court. See INTERNATIONAL LAW, CONGRESS, CONFERENCE.