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

What is the Difference Between Casual vs Full-time Employment?

Do you want to know the differences between casual and full-time employment for your small business?

A Guide to NES: The 11 Employment Entitlements

Understanding an employers obligations under NES is extremely important. Read on for more about NES: The 11 Employment Entitlements.

What’s the Difference Between Redundancy and Severance Pay?

Upon termination employees are often entitled to different forms of compensation. Here we discuss two of them - redundancy and severance pay.

Contractor Versus Subcontractor: What’s the Difference? (2026 Update)

As a business owner, it's likely you'll have to hire a contractor and subcontractor at some point. Read this guide to find out what they are.

Garden Leave: Advantages and Disadvantages

Wondering if you should have a garden leave clause in your employment contract? Check out the advantages and disadvantages of garden leave.

What is Long Service Leave in Western Australia?

Long Service Leave in Western Australia may have different requirements to other Australian jurisdictions.