Arbitration is referred to as a method of resolving disputes without necessarily going to court. Many individuals choose to forego the typical court system and instead resolve disputes through agreements. A third party listens to the arguments from both sides, reviews the evidence provided and afterward issues a final decision. The decision is binding on both parties. Typically, arbitration is used in labor disputes, family, business or consumer disputes.
1. Cost-saving. Arbitration has become a more common way to resolve disputes and for this reason, it’s a bit costly. However, if you compared it to litigation it is way cheaper. This is because reaching a resolution through arbitration is quicker and less complicated.
2. Informal. Arbitration proceedings are less formal and can be carried out in any setting. Furthermore, the procedure seems quite relaxed and simple. The parties have more control over the entire resolution process and there are usually no feelings of unfairness as a result.
3. Privacy. There is very limited privacy when it comes to the court systems. On the other hand, arbitration offers privacy to the parties because they are usually held in private. Also, the final decision can be kept confidential most especially if the dispute involved private information.
4. There is control. The parties can choose the arbitrator who will preside over the case. They can also select an arbitrator who is well experienced in the subject matter to increase the chances of a more impartial decision.
5. Flexible. Arbitration hearing can be tailored to suit the parties involved. For instance, the hearing can be scheduled at the time when everyone involved is available.
6. Avoids hostility. The parties involved in the arbitration are allowed to fully participate in the process. They can even take part in structuring the resolution. Therefore, there is less likelihood of hostility and anger towards each other.
7. It is efficient. In most cases, the final resolution is in favor of both parties. No one is left feeling like they were treated unjustly. This makes it more efficient than litigation.
8. Voluntary. No one is forced to enter into an arbitration agreement unlike in litigation where you are issued with a court order. The parties involved have to give their mutual consent.
9. The decision is final. Generally, the arbitrator issues a final resolution to the dispute. Therefore, his decision is final and it’s binding. You will rarely hear of a court appeal. This ends the dispute once and for all.
10. Arbitral awards are easier to enforce. There are usually so many wrangles that are involved with court judgments which make it harder to implement them. On the other hand, arbitral resolutions are enforced easily.
1. Inability to appeal. The general rule in such proceeding is the arbitrator’s decision is final and cannot be appealed. There are only limited situations when an appeal is allowed and it’s not an easy process.
2. Lack of formal discovery. The lack of a formal discovery process in the arbitration hearings results in lower costs. However, this means that one party may not have all the necessary information to fully exploit the case.
3. Discretion on the part of the arbitrator. The fact that arbitrations are usually private and lack transparency may leave room for bias in decision-making.
4. Rising costs. Most of the time, arbitration proceedings are considered less costly. However, in recent times the costs have been on the rise. Therefore, arbitrations can be more expensive than any other method of resolving disagreements.
5. Unclear standards used by arbitrators. There are times when the arbitrator may not strictly follow the law and instead favors the party on the higher position.
6. Mandatory arbitration does not give room for consent. In such a situation, one party forces the other party to use arbitration. This may give a potential for abuse and lose the element of impartiality.
7. Evidence not considered viable by a judge or jury can be used by an arbitrator. This means that the information used by an arbitrator to resolve the dispute may not be viable to a judge or jury during a trial.
8. Sometimes information is provided by a witness in the form of documents. Such a situation does not give an opportunity to cross-examine the testimony of that particular witness.
9. There is a lack of evidence. During the arbitration proceedings, there is usually very limited evidence provided. For this reason, what happens is you have to trust in the arbitrator to make the most suitable and legal decision.
10. There is a lack of consistency. Arbitration lacks the consistency you will find in the court system. There may be some cases where the arbitrator makes a biased decision leaving profound consequences.