High-Low Arbitration Law and Legal Definition
High-low arbitration is a form of arbitration in which the parties privately agree to the range in which the award must be, prior to hearing without informing the arbitrator. In this type of arbitration arbitrator’s final award will be adjusted to the bounded range agreed between the parties. The arbitrator will fix a final award in between the high and the low figures. In case if the parties agree on a amount that is below the arbitrator’s award,then the arbitrator’s award automatically moves down to the previously agreed-upon high figure. Similarly, if the arbitrator's decision is below the established minimum, then the award will move up to the predetermined low figure. If the award is within the agreed range, then the award passed by the arbitrator will be binding upon the parties. Generally the amount agreed by the parties in their high-low agreement will not be informed to the arbitrator. High-low arbitration is also called as a bounded arbitration.
The following is an example of a high low arbitration. In an arbitration between A and B, if A wants $300,000 and B is willing to pay $70,000, their high-low agreement would provide that if the award is below $70,000, A will pay at least $70,000;and if the award exceeds $300,000, the payment will be reduced to $300,000.