What is arbitration?
Arbitration is a process in which a third party, called an arbitrator or neutral (or an arbitration panel), renders a binding decision based on the merits of each case as presented. The arbitrator, or arbitration panel, acts as a judge to serve a verdict that normally cannot be appealed.
Prior to arbitration, parties usually have some input on the designing of the process. For example, parties may decide to limit opening statements or forego discovery. It is important that the rules of arbitration are well thought out or many of the cost advantages of arbitration can be lost. Once the ground rules are established, the arbitrator takes control of the proceedings. The arbitration process is not public, so the proceedings can be completely confidential.
Why should I use arbitration?
There are several aspects that make arbitration a process preferable to litigation. Arbitration results in a binding decision without the time, expense and publicity that can accompany litigation. Arbitration can be a very efficient process compared to traditional litigation. This makes it less costly and leads to quicker resolutions rather than lawsuits that can continue for years.
The value of an experienced arbitrator
Disputing parties select their own arbitrator, allowing them to choose someone with a relevant body of knowledge. For example, an attorney with experience in construction law would have a high level of understanding in a dispute over construction contracts. This previous knowledge means the arbitrator can spend less time learning about the basics of a situation and more time understanding the dispute.
Behind closed doors
Because arbitration is essentially a private meeting, it retains a high amount of confidentiality. The public and media are not entitled to attend arbitrations and, in fact, rarely know that they are scheduled to occur. Arbitration decisions and proceedings are not public information.
When should I use arbitration?
Arbitration can be used to effectively resolve disputes in a variety of situations including: business-to-business, business-to-consumer and employer-to-employee. Arbitration works best in situations where otherwise a trial is the likely result. Like litigation, arbitration ends in a 'win/lose' situation, but in a more manageable, flexible way.
News & Publications
- Business Law Advisory, January 2, 2013