Named for its use in Major League Baseball (MLB), baseball arbitration is a unique type of binding dispute resolution. This method, also referred to as final-offer arbitration, is the most deterministic and stakes-oriented, in that it demands that both sides truly ask themselves how reasonable their respective offers are.
Baseball Arbitration Process
Conceptual Framework
At its root, baseball arbitration is intended to incentivize the behavior of settling or making reasonable offers by shifting the risk of an extreme result to both sides. Unlike regular arbitration where an arbitrator could potentially reach a solution in the middle, baseball arbitration forces the arbitrator to choose either the final offer of Party A or the final offer of Party B and nothing in between.
The Process
Proposal Submission:
The final offers from each party (usually the employer and the employee, or the team and the player in sports contexts) are filed.
The offer of the other is kept confidential until the close date when both offers are revealed simultaneously creating a level playing field for both sides to not be influenced by the other offer.
Arbitration Hearing:
A hearing is held for both sides to present their cases. This will help provide appropriate evidence, a statement, and any other supporting materials for this.
Both parties seek to represent their proposal as being entirely reasonable and fair, contrasting it with perceived or actual extreme features or deficiencies of the proposal of the other party.
Decision Making:
After hearing all submissions and arguments the arbitrator chooses one of the final offers and that disposition is binding
It creates a two-partner-estate and forces the parties to produce plausible and reasonable offers which are required to convince the arbitrator to not pick the offer from the other side.
An Evolution in the Context of our History
Born in the field of professional sports, baseball arbitration sought to bridge negotiation breakdowns between teams and players around terms of pay. This was a means to achieve a speedier solution rather than boo, hope and pray for one online or even worse, endure potentially damaging industrial action for both the sport and its customers.
While rooted in sport, this form of arbitration has been adopted by a range of industries that seek effective means through which to resolve disputes. The decision is also binding and parties are encouraged to focus on making fair, reasonable offers, which can be appealing for industries that can benefit from rapid conflict resolution.
Advantages
Encourages Fair Proposals:
The pressure to not go to an extreme leads towards reasonable, palatable offers.
Swift Resolution:
This swift decision-making ends arguments before they can become protracted.
Cost-Effective:
At the same time, shorter resolution periods usually mean lower legal and operational costs.
Disadvantages
High Stakes:
The decision is binary though, so it is win-lose, and one of the parties is not getting his or her way.
Limited Flexibility:
Since arbitrators cannot alter a proposal to make some kind of middle-of-the-road solution, it is natural that the result would not always be equal.
Risk of Unbalanced Decisions:
If one party under or over-values the reasonableness of their offer by a significant margin, the result can appear unreasonably beneficial or damaging for one party.
Baseball arbitration is one of the more unique dispute resolution mechanisms, requiring the parties to consider carefully just how fair or reasonable their demands may be. This means that its utility is not limited to just sports, but you can apply this across different sectors, and it does spell out how healthy negotiation can be done to ensure the best results for all parties involved. Applying this high-stakes binary outcome approach is not without its drawbacks, but this methodology is an important tool at the disposal of arbitral tribunals as it helps move disputes to quick and cost-effective resolutions.
