Arbitration is a form of alternative dispute resolution (ADR). ADR is a process by which people try to resolve their disputes without going to court. Usually, the parties will agree beforehand that any legal dispute between them will be resolved in arbitration.
Arbitration of disputes is a process by which a neutral third party, agreed upon by the parties to the dispute, will hear evidence and arguments, and decide the appropriate remedy. Generally, they are not required to follow all of the procedural rules associated with litigation, which is meant to streamline the process.
Arbitration has many proponents who say that it should be used more widely, as an alternative to litigation. They argue that it would relieve strain on the judicial system, and that is cheaper, faster, and simpler than litigation. Some of the advantages that arbitrations have are:
1) Flexibility: since most arbitration is handled by private organizations, they have flexibility in appointing an appropriate arbitrator to each case. If a case involves highly technical issues, an arbitrator with the appropriate expertise can be appointed.
2) Cheaper than Litigation: The costs of arbitration vary widely based on the nature and complexity of a case, but tend to be cheaper than litigation. In addition, parties can decide ahead of time to limit how much money is awarded if it is decided one party has wronged another. In contrast, juries in a courtroom can set awards according to the law, instead of what the parties in dispute believes is fair. Some studies have also shown that arbitration usually takes significantly less time than a comparable case would in court.
3) Simplified Rules and Procedures: Arbitration is simpler than litigation because it is less formal than litigation. Meetings can be schedule based on upon the parties needs, rather than on the schedule of the courts. With fewer rules, all parties are free to speak and participate without the hostility which can often result from litigation. Also, arbitration is private, without formal public notice or records. These factors, privacy and a less formal environment, can be extremely helpful if there is embarrassing or extremely sensitive information involved.
4) Faster than Litigation: Recent studies have shown that arbitrations are much faster than litigation. This can also be a benefit because it saves time and saves money on attorney fees
5) Less Hostile: In arbitration parties are trying to come to a mutual resolution and help each other get to that solution. Unlike litigation proceedings, parties work with eahother in a less hostile way to structure the resolution.
6) Private Setting: Arbitration proceedings are always held in a private settings. Companies which wish to keep trade secrets or divorcing couples who want more open communication might prefer this style of dispute resolution over traditional ligation.
7) Specialization: Parties can select arbitrators based on backgrounds other than law. For instance, an arbitrator with a medical background in medical malpractice cases or a minister in a religious arbitration would be ideal.
The success of the judicial system depends on the objectivity of the party making a decision. Although both judges and arbitrators are subject to prejudice and bias, judges are not selected by the parties in dispute and judges are expected to make their decisions and the logic behind such decisions in writing.
1) Limited Recourse: A arbitrators decision is usually final and there is not much either party can do if they believe that the arbitrators decision was unfair or illogical.
2) Questionable Objectivity: Although arbitrators are agreed upon by all parties in dispute, arbitrators can be pre-selected by a party in the event of a dispute, with the other parties agreeing only to facilitate an agreement. This is common when a contract has a forum selection clause, a clause in a contract stating how a dispute will be resolved, which can give employers or businesses power over employees or consumers. The questionable objectivity of the arbitrator is thus compounded by an uneven playing field.
3) Very Difficult Appeals Process: Arbitration, unlike formal ligation, has almost no appeals process. Unless it can be shown that the arbitrator was grossly malicious, biased or corrupt, the decision reached in arbitration is final. This can be particularly difficult since the arbitrator is under no obligation to make a written decision and the decisions rendered are made in private rooms with no public records. This lack of transparency and oversight can be a huge burden if the decision greatly disadvantages one side.
4) Expensive: Arbitration proceedings usually is less costly than litigation, but studies have shown that the cost is rising
Given that decisions made in arbitration are final with little transparency, it is crucial to have an attorney who can help obtain a fair outcome for you. In addition, there may be factors in a case which may favor traditional litigation over arbitration or vice versa. Only a lawyer can determine what these factors may be.
Last Modified: 09-27-2017 12:23 PM PDTLaw Library Disclaimer
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