Arbitration
Arbitration is a process that takes place when two parties who have a problem (dispute) agree to have a third person (the arbitrator) listening to their arguments and then working out a solution. The arbitrator’s role is like that of a judge and both parties must accept his decision.
It is often used to settle contractual or commercial disputes. Arbitration can be used to reach an agreement rather than using mediation or going to court. The parties can come to an agreement in advance that arbitration could be used in the case of disagreements. This will be listed in the contract between the two parties but it does not remove the right of any party to insist on litigation instead.
An arbitrator will always be an impartial party and he will decide on the amount of the claim settlement (in legal terms it is called the quantum.) The arbitrator will be an independent person or body and his decision will be binding on both parties.
In the case of insurance, such as car insurance, it will be a procedure in which the insurance company and the insured agree to settle a claim dispute by accepting a decision made by the arbitrator. However, both parties must agree to accept the process of arbitration, it cannot be enforced by one party.
Going to court can incur heavy legal expenses and adverse publicity for both parties. An arbitration order can be enforced in a court of law, unlike mediated settlements. The one “perceived” disadvantage is that there is no appeals procedure allowed but the advantages are that it is cheaper, quicker and an easier procedure to use in place of litigation.
In South Africa consumers can also contact the Ombudsman for short-term insurance and request arbitrational assistance.