The Pros And Cons Of Arbitration In A Business Dispute

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The Pros And Cons Of Arbitration In A Business Dispute

9 April 2018
 Categories: , Blog


Rather than going straight to litigation, you may want to consider arbitration. A business dispute can be resolved via arbitration without going to court, and there are both some benefits and negatives to this process. 

What is Business Arbitration?

In arbitration, the parties involved agree that a third-party (usually a judge) will decide upon the outcome of the case. This neutral third-party will hear all of the arguments, as though in court, and then will make a decision based on fairness and their interpretation of the law. Both parties will be bound to this decision.

What Are the Advantages to Business Arbitration?

Arbitration is a much faster and cheaper process than going through the court system. It's also far less likely to create hostility and aggression, as both parties are working together to find a mutual common ground. In arbitration, much like mediation, both parties are encouraged to work effectively with each other to create compromises. Both sides are allowed to make concessions to the other or to change their standing.

Arbitration is also flexible, as it can be scheduled around the business, business owners, and other principles within the case, rather than having to be moved around solely due to the court system. Further, arbitration is a private process rather than the public record; many businesses prefer arbitration because it keeps their business out of the news and the public eye, allowing them to resolve issues without impacting their public perception.

What Are the Disadvantages to Business Arbitration?

Once the arbitrator has made their decision, it's very difficult to appeal or reverse. Unless the arbitrator has blatantly made an unfair or strange decision, both parties have already agreed not to appeal and to take the decision as binding.

It can be difficult to ensure that an arbitrator is entirely objective because of this, and in the past arbitration services have been used unfairly. Arbitration services can be used against employees by companies, forcing employees into a potentially unfair arbitration system rather than having to go directly to litigation. 

Further, arbitration has a lack of transparency, as the third-party who is making the ruling can essentially make any ruling they desire.

Whether arbitration is the right path depends on the business and the stakes at hand. Either way, in a business dispute, a company should listen to its lawyer regarding which option is best for them. Mediation is another option, as is going straight to litigation.