What Is Mandatory Arbitration?

Table of Contents

Share at:

Have you ever been through mandatory arbitration or has a court directed you to go through mandatory arbitration? In the past, we covered generally what arbitration is, but in this article, we will specifically look at mandatory arbitration. To refresh, arbitration is an alternative to litigation. Arbitration involves an independent person, known as an arbitrator, deciding a dispute between two parties. The arbitrator’s decision is called an award, which will be enforced by the Court, much the same as a judge’s decision will be.   

What is it?

Mandatory arbitration is when a court directs two parties to arbitrate, regardless of whether they change their mind and no longer want to. A court will do this when there is a clause within the contract, known as an arbitration clause, stating that both parties agree to arbitrate when irreconcilable issues arise.

Who runs the mandatory arbitration?

In most cases, the arbitration clause will state who is going to arbitrate. However, the clause can also state that parties will agree to who will arbitrate at a later date. This is an agreement to agree clause. If the arbitration clause does not include either one, then the arbitration clause most likely will not apply.

Can a court order arbitration?

A court will not order arbitration specifically, but it can order parties to use alternative dispute resolution. Arbitration is a form of alternative dispute resolution, but it is not the only one. Conciliation and mediation are other forms of it. When courts order parties to commence alternative dispute resolution, the intention is for parties to negotiate their differences. If this fails, then the parties will return to the court to litigate their dispute.

What if you do not want arbitration?

Before signing any contract make sure you or your lawyer checks for an arbitration clause. If there is one, check if it has been drafted correctly. If it has, then you will need to go to mandatory arbitration.

Courts enforce mandatory arbitration when the contract between the two parties has a properly drafted arbitration clause. If an arbitration clause exists in a contract you are reviewing or if you want to draft one, you should seek legal advice.  

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

                

Share at:

Simplify creating legal documents today

Browse through Lawpath's AI tools which can be used to draft, review and refine legal documents today!

Related Articles

Statistics on Small Businesses in Australia: 2026 Update

Read about all key statistics from 2024 for small businesses in Australia: employment, industries and failure rates.

What Is a Grandfather Clause? Meaning, Examples and Business Uses

Find out everything you need to know about grandfather clauses and the many ways they might impact your day to day business.

Can An Employee Be Terminated While on Sick Leave?

Can an employee be terminated while on sick leave? Read this article to find out.
Statute of limitations explained in Australian law

What is Statute of Limitations in Australia?

Have you ever wondered whether there is a statute of limitations in Australia? Read this article to find out.

What Is Capital Gains Tax (CGT)? A Guide for Small Business Owners

Navigating capital gains taxes in Australia? This is your comprehensive guide on what triggers CGT, how to plan for it, and mistakes to avoid.

Employee Bonus Payments: What Taxes Apply?

There are several taxes that could apply to employee bonus payments. Find out what they are.