What is Arbitration?

There are many forms of arbitration, but when we reduce it to it’s simplest form

Arbitration is an agreement between two (or more) parties to try to resolve a dispute outside of the organized court system. It is one of the many methods that are collectively referred to as alternative dispute resolution. The basis behind Arbitration is to provide an alternative to settling a dispute through an impartial or neutral third party without having to abide by the typical formal court proceedings. Arbitration has historically been highly common in labor and construction disputes, but arbitration has become the go-to method for virtually every commercial business dissension.

Arbitration Specifics

When an arbitration begins there are typically no rules other than those agreed upon by involved parties. However, if the parties deem it necessary, it is common for parties to agree on a defined set of rules from an organization such as the American Arbitration Association. There are two types of arbitration: Binding and Non-Binding. When one of the parties’ wins, a binding arbitration allows them to take the award and enforce it through an official court of law if the losing party does not comply with the outlined provisions. A non-binding arbitration is often times used in a discord between two parties in an attempt to resolve their differences, but neither party can be forced to comply with the decision of the neutral third-party arbitrator.

Benefits and Disadvantages of Arbitration

Arbitration is promoted as an efficient way to resolve conflicting parties. A few of the benefits include:

  • Avoiding increasing hostility through participation by both parties to work towards a common goal.
  • It’s typically more affordable than litigation
  • Unlike organized court trials, the flexible nature of arbitration allows for convenient scheduling and simplified rules in a private setting.
  • Privacy in the resolution of a dispute, not in open court.

While there are many positive reasons to hire an arbitration lawyer, there are a few things to consider. Some potential disadvantages to arbitration are:

  • There are limited resources if you disagree with the arbitrator’s final award decision. In other words, you could be stuck with the decision regardless if the award seems unfair or unjust.
  • Many large companies and car dealerships have “take-it-or-leave-it” arbitration clauses that are designed to work in their favor rather than the challenger’s favor who likely has less money and less power.
  • Due to arbitration being held in private settings rather than open courtrooms there is high lack of transparency which can lead to less objectivity and biased driven decisions.