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What are pros and cons of going through arbitration?

On Behalf of | Oct 8, 2021 | Business Litigation

Going to court to resolve your business contract dispute can be a lengthy and costly process. This is why some parties look for other ways to resolve a dispute. One alternative to a court battle is to go to arbitration. This is a method that may be to your benefit but it could also present some risks.

If your business contract has an arbitration provision, it may help to know what awaits you if you seek resolution through this method.

Arbitration versus mediation

Some people confuse arbitration with mediation, but Chron explains that the two are not the same. A mediator facilitates discussions between the disputing parties to reach a mutually agreed-upon solution. A mediator has no power to impose a resolution. On the other hand, an arbitrator can hand down a solution that binds all parties involved.

You might prefer working with an arbitrator because you feel that working out an agreement is not possible. Also, you may need another party to determine facts or interpret the law. An arbitrator has the ability to perform these functions. Additionally, arbitration is a private process that can avoid revealing sensitive information to the public.

Getting an expert to arbitrate

The problem with having a judge resolve your case is that your judge might not understand the issues that underlie your dispute. Some business agreements involve technical matters that not all judges understand. Conversely, you and your opposing party may pick an arbitrator who is an expert in the issues involved. This can lead to a solution that better fits your situation.

Risks involving an arbitrator

Keep in mind that it is difficult to replace an arbitrator once you have selected one. It is possible that your arbitrator may carry biases towards the other side or lacks proper resolution skills or competency. If you do not approve of an arbitrator’s decision, you probably will not be able to appeal it.

You will have to conduct due diligence to find an arbitrator that is competent, ethical and experienced. Still, you may find the risk of an unfavorable outcome from an arbitrator does not outweigh the risk of a jury trial rendering a verdict that could go against you and impose punitive measures on you.