Definition. Private arbitration is the referral of a dispute to an impartial third person chosen by the parties who agree in advance to be bound by the arbitrator's decision after a hearing in which both parties have an opportunity to be heard. In essence, the parties agree to substitute a private method of dispute resolution in place of a court or jury trial.

Validity and Enforceability. A written agreement to arbitrate is expressly authorized by Oregon's private arbitration statute (ORS 36.600-36.740) and the Federal Arbitration Act (9 USC Sections 1-14). An arbitration award may be submitted to the court clerk for confirmation as a judgment of the court. (ORS 36.700; 9 USC Sections 9, 13.)

Agreement Required. Private arbitration requires an agreement to resolve the dispute through arbitration. If the agreement to arbitrate is made before any dispute has arisen, it is called a "predispute arbitration agreement" (which usually consists of an arbitration clause in a contract). If the agreement is made after a dispute arises, it is called a "submission agreement."

The Arbitration Procedure. Under ASP's procedural rules, a statement of claim or a submission agreement is filed with ASP. The parties then choose an arbitrator from a list of proposed arbitrators provided by ASP. A convenient hearing date is promptly set so that each side can present its case (with or without an attorney). The hearing (which is not open to the public) usually takes place in a conference room and is conducted in a dignified but informal manner. After listening to the testimony and considering the evidence, the arbitrator decides the dispute. The arbitrator's decision on the facts and the law is final. The arbitrator's written decision is called an award. The law permits either party to file the arbitration award with the court clerk for confirmation as a judgment of the court. Compared with court litigation, some of the benefits of private arbitration are promptness, economy, convenience, privacy, finality, and in having the dispute decided by a person who has legal expertise in the subject area of the dispute. The costs and fees consist of the filing fee that is paid to ASP and the compensation that is paid to the arbitrator (who is an attorney or a retired judge).

Comparison with Court-Annexed Arbitration. Private arbitration takes place outside of the court system and is binding on the parties. Court-annexed arbitration takes place within the court system under court imposed rules after a lawsuit is filed, and any party unhappy with the arbitrator's decision can receive a trial de novo just as if the arbitration had never occurred (ORS 36.400-36.425).