When most people think about solving legal disputes, they think of going to court and the trial process. But Americans are now increasingly turning to other options to solve these arguments through alternative dispute resolution, often called ADR for short. Comprised of a number of different methods, ADR is seen as a less expensive, streamlined way to settle conflicts in a more private setting. ADR can be agreed to by both sides, or it is sometimes built into contracts as the named course of dispute resolution.
One of the more well-known ADR options is arbitration. Arbitration is a process where both sides agree to have their legal disputes heard by a neutral third person (or persons). This person hears the evidence and comes to a decision which is binding on all parties involved. So how does it work, and what are the pros and cons as opposed to litigation? Here is a short guide to ADR and the arbitration process.
Although arbitration is not as structured as litigation, it is a more formal process than negotiations or mediation. Parties schedule time with an arbitrator who reviews all the evidence, listens to each side, and then comes to a decision on the issue (or issues) that the parties want resolved. An arbitrator’s decision can be either non-binding or binding, with the majority now being recognized as binding.
Most arbitrations today arise out of contract language. This usually happens where a clause states that any disputes about anything covered by that contract will be decided by independent mandatory arbitration, and that the arbitrator’s decision will be binding on both parties. There are some instances where arbitration is not binding, which allows either side to seek out litigation if they so choose, but this is no longer the norm.
One of the biggest advantages to arbitration is the less formal atmosphere it offers compared to trials and litigation. Because arbitration happens outside of a courtroom setting, it offers the parties flexibility in choosing both the location and the date and time the arbitration will occur. With litigation, everything is limited by what court the case must be in, what judge is assigned to it, and what dates are open for a trial. Arbitration also eliminates most of the complicated rules and procedural issues that come with litigation. It simplifies the process to make it not only less complicated, but more time efficient. Because of this, the legal issues can be solved in a much shorter time frame, and for less money.
Arbitration also allows any discussions or decisions to be kept private. Traditional litigation often means that some details will become public record, whether the parties involved want it or not. Arbitration allows any proceedings to be kept private if it is needed, such as a company protecting trade secrets or a divorcing couple keeping personal details private. Finally, this ADR type lets the parties pick an arbitrator instead of being assigned to a judge. This means they can find one that specializes in that type of law, or that particular subject matter.
While there are certainly many advantages to arbitration, nothing is without drawbacks. Arbitration’s ability to operate outside of the traditional judge and jury litigation system means that appealability for a losing party is often very limited. Unless you can show that the arbitrator’s decision was extremely biased or illogical, courts are not likely to overturn their decision because both sides agreed to the process in the first place.
Because arbitration is often dictated by contract language, the party that drafted the contract are often in a more advantageous place during the process. Sometimes these clauses reserve the right for the drafting party to choose the arbitrator, the location (forum selection), and what state’s law the arbitration will follow. This often means that businesses, employers, and the party with more resources and attorneys will have the upper hand over the average person.
Because an arbitration is less formal and often less expensive, most people will consider handling one themselves, especially if the amount in issue is not exorbitant. But like any other legal issue, there will be parts of the process that are complicated and can quickly overwhelm anyone not used to dealing with these situations. This is why it is important to contact an attorney that specializes in the type of law the arbitration concerns, whether it is contract law, family law, employment law, or any other type.
An attorney can explain the process and be your advocate throughout the arbitration process. They can help to make sure that you are not being taken advantage of and that all of your rights are protected. ADR is a growing and viable alternative to the litigation process, but you still need to make sure it is the right option for you.