Arbitration: The Ins and Outs of This Unique Dispute Resolution Method
Credit: @timmossholder
If you’ve ever signed a cell phone contract, utility or virtually any other agreement for goods or services these days, you have agreed to resolve any dispute with the other party through arbitration. There are several key things about it that make it different from court, and some are both potentially beneficial or detrimental depending on circumstances. As with any method of resolving a dispute, you’ll always be left with some level of costs and uncertainties. Making choices, if possible, is all about awareness and trying to get yourself out of that sticky situation as quickly and painlessly as possible.
One benefit of arbitration is the ability to choose the person who will be making a decision about your case. In court, you are randomly assigned a judge, and while they can be reassigned at times, that can be just as risky in a sense. In arbitration, the arbitrator is typically a mutual choice—meaning both parties must agree on some choices. This can present a temporary challenge if there is little trust between the parties, but the ability to choose from a small pool gives the parties more freedom in picking a neutral decision maker. In addition, this method allows the parties to choose arbitrators that might have previous specialized experience that may lend itself to the kind of facts involved in the case well.
Arbitration is relatively flexible. As to the location where arbitration is to be conducted, that can depend. Truthfully, I’m not sure how much this will matter in the future with the growing regularity of virtual appearances. Sometimes there are choice of law provisions—applying the law of a certain state to the matter via written agreement. Fortunately, arbitration is not really dependent on a supporting system and structure in the way court is. The arbitrator is typically an individual, who may just have minimal staff that handles scheduling and getting paperwork and payments in order, etc. Getting the process scheduled and getting from beginning to end is usually a much more condensed timeline.
One of the main reasons parties prefer arbitration is privacy. If you are forced to go to some form of trial and are concerned about public perception, arbitration and mediation are the most private methods of dispute resolution. Arbitration is distinct in that it is private, but not necessarily confidential like mediation. Still, when mediation is out, arbitration could be an attractive option for one concerned with keeping things as private as possible.
In addition to the privacy considerations, there are always cost considerations, of course. Frankly, traditional courts are designed in a way that tends to extend the resolution process and increase costs greatly. It just is what it is there. Arbitration is not bound to that structure. This allows for a condensed litigation, discovery and trial (arbitration) model. Unlike in court where there are set fees for filing certain motions, in arbitration you are hiring a third party and therefore will be paying for their time, which is not inexpensive. Rates for arbitration vary greatly and can be structured in different ways. This is a downside to arbitration, but for the right parties, the pain of arbitration fees is outweighed by the benefits of the process.
When it comes to the resolution in arbitration, it is much like a judge’s decision or order. In arbitration, the decision is called an “award.” Arbitration awards are basically final. Yes, final. The instances for appeal are virtually nonexistent, and courts are always very hesitant to interfere with arbitration, especially where the parties agreed in writing to submit to that process in the event of a dispute. This is the risk of arbitration that frightens people the most, understandably so. It is better to think of arbitration not as an alternative to legal proceedings, but an alternative type of proceedings
Although arbitration sometimes isn’t much of a choice, there are still many reasons some may choose it. The nature of the dispute, the kinds of parties involved, the potential greater costs involved with litigation, etc. should all be considered when deciding how to solve a dispute. One thing is certain, mediation is still better to attempt first whenever practicable.