Quick and Dirty Introduction to the Ins and Outs of Arbitration

What Is Arbitration?

As a form of Alternative Dispute Resolution, arbitration involves a third-party person who acts as the decision maker for the conflict.  The arbitrator listens as two or more conflicting parties’ state their case and they will award a law-binding decision.  The process is similar to the court system, except cheaper and faster, hence it is included in the umbrella label called “alternative dispute resolution” or ADR.

Advantages of Arbitration:

1. Costs Less- Arbitration is a less expensive means resolving conflict.  There are no lawyer costs and no costs to the government for a judge and jury.
2. Time- A case decided through arbitration can take less time to conclude.  In courts, you may be waiting for a judge to hear your case for months or years.
3. Confidentiality- Proceedings carried out through arbitration can be kept confidential.  Cases that attend court are open to the public and may be witnessed by anyone.
4. Expertise- Clients may choose an arbitrator based on their expertise and education pertaining to their case, allowing the arbitrator to have enough knowledge to award a decision to the appropriate party.

Disadvantages of Arbitration:

1. Clarity- There have been times when clients of commercial contracts were unaware that mandatory arbitration was required in case of dispute, since it was placed in the fine print.  Although this is not really a disadvantage of arbitration itself, it does leave a bad taste in the mouths of certain participants.
2. Enforcement- A decision awarded to a party is more difficult to enforce than a settlement handed down from a judge.

Binding Arbitration:

This form of arbitration must be regarded by everyone involved as being equal to a decision by a judge.  Any decisions awarded in arbitration are final and law-binding.  Clients involved in Binding Arbitration must agree to waive their rights to have the case heard before a judge and jury.

Non-Binding Arbitration:

Non-binding arbitration is for clients who wish to retain their rights for a judge and jury to hear the case after an arbitrator has awarded the decision.  Client’s, who choose this option, may have the case turned over to a judge and jury in order to have a chance to receive a more gratifying decision.

How It Is Used:

Arbitration is often a method used by commercial clients.  For International Commercial clients, arbitration is a popular option because it allows for an impartial third-party, as opposed to a judge from a client’s home country, to award a decision.  The arbitrator’s decision is law-binding and final.

Conclusion:

Arbitration is a way for commercial companies to resolve disputes and conflict.  The process is cost effective and can be settled in a matter of days. It allows both parties to remain on neutral, legal territory, which is important for International Commercial clients.  Having the option to choose an arbitrator who is knowledgeable in the subject at hand is a lucrative alternative to the court system.

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