Arbitrator, Arbiter, Arbitration and Arbitrage
Hi, I'm Robin. Welcome to TransLegal's lesson of the week.
Today I'm going to try to demystify the confusion between the words arbitrator, arbiter, arbitration and arbitrage.
Let's start with these first two, arbitrator and arbiter. They are both types of judges but they perform in different kinds of forums. So if we start with an arbitrator. An arbitrator is a judge, but only in arbitration procedures. Those are the only forums. What is an arbitration proceeding you may ask. Well it's a kind of alternative dispute resolution, that is where a legal case is taken and settled out of court. And why would you take a case out of court to settle it in an arbitration? It's done for matters of speed. Usually, it's much quicker to settle a case in an arbitration. It is also secret, so companies that have disputes where they have trade secrets that they don't want to come out in open court, they prefer to take their cases in arbitration proceedings and, moreover, the arbitrators often have great expertise in the subject matter. So those are all the reasons why you would take a case to an arbitration held before one arbitrator or a panel of, usually three, arbitrators.
So what is an arbiter? An arbiter is a judge of anything. Could be a judge of morals, of taste, for instance it is often said that Vogue magazine is the arbiter of fashion worldwide or that the Film Censor Board is the arbiter of morals of all of the movies and TV shows that we see. So this is a much more general word. It can also refer to a court. So it is often said that the US Supreme Court is the final arbiter of all legal disputes in the US. So this is a word that we can use in a very general way as opposed to the very specific way in which we use the word arbitrator.
OK, this leaves us with one more thing now. Arbitrage. This is very different than arbitration. Arbitrage is the simultaneous buying and selling of currencies or securities on two different markets in order to try to take advantage of the difference in prices. So for instance, what an arbitrager does, and please note that you can spell this in two different ways, E U R, the French way or just E R, but they're both pronounced arbitrager. An arbitrager will, for instance, buy securities on the London Stock Exchange and almost simultaneously try to sell them on the New York Stock Exchange in order to try to make money by taking advantage of some sort of a small price difference or disparities between the two exchanges.
I hope this has been enlightening for you. Thanks for listening. If you have any questions or comments please enter them below and don't forget all feedback is good feedback so we look forward to hearing from you. Thanks.