Arbitration Pros and Cons

The myriad rules, formalities and procedural safeguards of the American justice system can sometimes seem quite boggling to the average citizen. Forms of Alternative Dispute Resolution (ADR), such as arbitration and conflict mediation, have become popular options for parties that wish to settle legal claims without going through the traditional civil system.

In traditional litigation, one party hires an attorney and files a lawsuit, requiring the other party to defend the lawsuit by hiring his or her own lawyer. In this model, a judge or jury is responsible for deciding whether the prosecution or defense is in the right.

Understanding Arbitration

In arbitration, a neutral third party is employed to resolve the conflict instead of bringing it before a judge or jury. Arbitration is typically a binding procedure (though there are exceptions), and arbitrators function a bit like judges in that they make decisions about evidence and submit written statements about the case.

The Pros of Choosing Arbitration

Many people seek arbitration services as an alternative to traditional litigation because it is generally considered to be a less costly and time-consuming process. Other reasons for choosing arbitration may include:

• Ability to choose an arbiter: You can hand-pick your neutral party instead of relying on a random judge or jury. Arbitrators can be chosen based on their expertise on a subject, or for their personal disposition.
• Ability to influence awards: In arbitration, parties can formulate pre-arranged conditions about the amount and nature of the award, setting high-low caps or otherwise customizing the procedural options.
• Fairness: The arbitrator is generally more concerned with what''s fair than with legal minutiae and technicalities.
• Maintaining privacy: Because arbitration is a choice made by private agreement between parties, arbitration hearings arenot open to the public,and awards are not considered public record.
• Saving time and money: Arbitration procedures havemore relaxed rules and less formalitythan those of the court system, which often means it takes less time and moneyto bring a case to resolution. Similarly, setting up arbitration is much easier than bringing a case to court and it avoids the long waits and hassles associated with traditional litigation.

Despite its many benefits, arbitration is not always the best choice for every case. In certain situations, it can lead to far more complications in handling a dispute.

The Cons of Choosing Arbitration

The most appealing benefits of arbitration often double as drawbacks when it comes to resolving difficult cases. Here are some of the common limitations of choosing to resolve a case outside the courts:

• An arbitrator''s power: The arbiter of a case has more discretionary and decision-making power than a judge or jury. As a result, if you make the wrong choice or accidentally elect an unskilled arbitrator, the ramifications are more profound. Because of the nature of arbitration, there is less chance to overturn or appeal your arbitrator''s decision.
• Cost: Arbitration is not always cheaper and more efficient than going to court. The informality that makes arbitration so appealing on many levels can also have less pleasing ramifications: Cases can drag on indefinitely when other parties won''t cooperate or there are scheduling difficulties. Such complications may result in unexpected expenses, due to the fact that each meeting or review includes the cost of renting a space and paying your arbitrator''s bill.
• Fewer formalities: The fewer procedural safeguards and formalities in arbitration mean that it''s easier for the other party to misbehave or act unethically without repercussions. There is no judge present to enforce proper proceedings.
• Inability to appeal: Arbitration lacks the regular system of appeals found in litigation proceedings. If something goes wrong in a case or there''s an obvious mistake made by an arbitrator, it''s very unlikely to be readdressed. Arbitration cases are considered binding, and generally cannot be brought to court. In some extreme cases, however, courts do have the option to avoid enforcing unconscionable arbitration clauses.
• Need for cooperation: In arbitration, you are more dependent on the cooperation of the other party. Therefore, it''s more difficult to make discoveries than in cases tried through traditional litigation.
• Undefined rules: The rules for arbitration are less well-defined, and there are rarely verbatim accounts recorded for proceedings as there are in regular litigation. This means there is a wider margin for error, and sometimes parties have a harder time proving what was agreed upon after a case terminates.

The key in deciding whether to arbitrate a case often lies in carefully considering the nature of the dispute and the quality of relationship between the parties.

Generally, the more complicated and adversarial the relationship, the more taxing it will be to seek mediation outside a court of law. The checks and balances, as well as precautionary formalities, associated with the traditional litigation system may still be the best choice when dealing with a highly volatile case.

Resources

Blackman, John S. (1999). Things to Consider Before Including an Arbitration Clause in Your Contract. Retrieved March 7, 2008, from the FindLaw Web site.

Corcoran, Tim (2008). What is ADR? Retrieved March 7, 2008, from Redlands Arbitration and Mediation Services Web site.