Understanding Arbitration in Chicago Construction and Real Estate Disputes

What Is Arbitration?

Arbitration is a dispute resolution process in which the parties submit their dispute to a neutral decision-maker rather than a court. The arbitrator hears evidence and legal arguments and issues a written decision, known as an award, that resolves the dispute.

Is Arbitration Binding?

In most private, contract-based arbitrations, the arbitrator's decision is final and binding, with courts having very limited authority to review or overturn an award except in narrow circumstances such as fraud, evident bias, or actions beyond the arbitrator's authority.

However, some courts in Illinois may require parties to participate in court-mandated arbitration after a lawsuit has been filed, even when the contract does not call for arbitration. In those proceedings, the arbitration decision is typically non-binding, and a party may reject the award and proceed with litigation if they do so within the required time limits.

How Is Arbitration Different From Mediation?

Mediation is a non-binding process focused on facilitating settlement. The mediator does not decide the outcome. Arbitration, by contrast, results in a binding decision imposed by the arbitrator after hearing the evidence.

How Is Arbitration Different From Litigation?

Arbitration is a private dispute resolution process governed primarily by contract rather than court rules. There is no jury, procedures are more flexible, and appeal rights are extremely limited. The arbitrator serves as both the fact-finder and decision-maker, and the result is a final, enforceable award.

Litigation, by contrast, takes place in a public court system and is governed by formal procedural and evidentiary rules. It typically involves broader discovery, motion practice, and the possibility of appellate review, but often comes with greater cost, delay, and public exposure.

Is Arbitration Mandatory?

Sometimes. Arbitration may be mandatory if the parties agreed to it by contract. Many commercial and construction contracts include arbitration clauses that require disputes to be resolved through arbitration rather than in court. When a valid arbitration agreement exists, and a party does not waive it, courts generally enforce it.

Even when a contract does not mandate arbitration, in some Illinois courts, a judge may order the parties into court-mandated commercial arbitration after a lawsuit has already been filed. This type of arbitration is procedural and differs from private contractual arbitration. Court-mandated commercial arbitration decisions are not binding, and a party may reject the award and proceed with litigation if they do so within the required time limits.

When Is Arbitration Commonly Used?

Arbitration is often used when parties want a binding resolution without court involvement, value confidentiality, or prefer a decision-maker with subject-matter experience. In many cases, arbitration is used because the parties agreed to it in advance through a contract.

Who Selects the Arbitrator?

Arbitrators are typically selected by agreement of the parties or through an administering organization. In more complex disputes, the parties may choose a panel of multiple arbitrators rather than a single decision-maker.

What Is the Arbitration Process?

Most arbitrations begin with a preliminary conference where procedural issues are addressed, including discovery scope, motion practice, scheduling, and hearing format. These decisions are often memorialized in a case management order. Afterward, the parties proceed through discovery, and the dispute is resolved at an arbitration hearing scheduled by the arbitrator.

How Much Discovery Is Allowed in Arbitration?

Discovery in arbitration is usually more limited than in litigation, but the scope varies depending on the contract, applicable rules, and the arbitrator's discretion. Well-managed arbitration focuses on targeted, proportional discovery aligned with the needs of the dispute.

Are Arbitration Hearings Like Trials?

Yes, in substance. Arbitration hearings involve witness testimony, exhibits, and legal argument. While the setting is typically less formal than a courtroom, the arbitrator acts as the fact-finder and issues a binding decision.

Are Arbitration Proceedings Confidential?

Arbitration is generally private, but confidentiality depends on the arbitration agreement and governing rules. Arbitration awards may become public if a party seeks to enforce or challenge the award in court.

Can Multiple Parties Be Included in an Arbitration?

Yes, but only parties who have agreed to arbitrate can be compelled to participate. This can complicate disputes involving multiple contracts or project participants who are not all bound by the same arbitration agreement.

Can Arbitration Decisions Be Appealed?

Appeal rights are extremely limited. Courts generally will not review an arbitrator's legal or factual conclusions, even if they appear incorrect. An arbitration award may be challenged only in narrow circumstances, such as fraud, evident bias, or where the arbitrator exceeded their authority.

Is Arbitration Faster and Cheaper Than Litigation?

Often, but not always. Arbitration is typically faster and less expensive than litigation, particularly when discovery and motion practice are carefully managed. However, poorly controlled arbitration can become as costly and time-consuming as litigation, especially if discovery becomes expansive.

Do I Need a Lawyer for Arbitration?

Arbitration is a formal adjudicative process with binding consequences. Legal representation is strongly recommended, particularly in complex or high-stakes construction disputes, to ensure procedural issues and risks are properly addressed.