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Arbitration Pros and Cons

Deciding how best to pursue a legal claim can be a challenging task. It makes sense to weigh the pros and cons of each path you might take. One common form of alternative dispute resolution (ADR) is arbitration. During arbitration, the parties submit a dispute by agreement to a neutral third party who makes a binding decision on the matter in question. 

Because an arbitrator's decision is generally final, it's essential to weigh your options before agreeing to arbitrate a dispute. You will want to assess the advantages and disadvantages in a thoughtful way.

Provided below are pro and con lists reflecting the general views of arbitration. We'll look at both positive and negative aspects of arbitration, along with how a party's perspective might play into the equation.

Arbitration Pros

Arbitration has various advantages over a lawsuit in the court system. Below are many of the perceived benefits.

  • Cost: Arbitration is often, on average, a cheaper way to resolve disputes when compared to court proceedings. Attorney fees may rise in court litigation which provides for more pretrial hearings and disputes over discovery. However, this isn't always the case, as described in the "cons" section below.
  • Speed: With some exceptions, arbitrations follow more specific and defined timelines for resolving a dispute. Arbitrators, unlike judges with crowded dockets, can serve as a focused decision-maker. This often results in quicker final decisions.
  • Fairness: Arbitrators are commonly selected by agreement of both parties. This may occur via a third-party arbitration service or through an outlined method involving input from both parties. This means that in many cases, no single party controls who the arbitrator (or arbitrators) will be.

Additional Advantages of Arbitration

Along with the considerations mentioned above, there are other aspects of arbitration that are generally advantageous.

  • Finality: For the most part, it's difficult to appeal arbitration rulings. This is true even if an arbitrator has made some mistakes. This finality can be a positive factor in relation to ending a dispute, one way or another, and allowing the parties to move on.
  • Simplified procedures: Litigation can involve a lot of paperwork, multiple hearings, depositionssubpoenas, and similar processes. Arbitration may eliminate some or many of those time-consuming and expensive parts of the discovery process. For example, simplified rules of evidence will apply in arbitration proceedings.
  • Confidential: Arbitration hearings don't occur in open court and transcripts aren't part of the public record. This confidentiality can be very valuable for parties in some cases where parties seek to maintain privacy.

Cons of Arbitration

Now that you've learned about some of the advantages of arbitration, it's essential to also consider possible disadvantages.

  • Cost: While cost was listed as a "pro," it can also be a "con." That's because arbitration doesn't always reduce the cost of resolving a legal problem. Arbitrations can vary in complexity and can take many forms. Some types of arbitration are more likely to increase the costs of dispute resolution as compared to litigation. As one example, arbitrations can be binding or non-binding. In non-binding arbitration, the decision or award in the case isn't final. That means the parties are free to take their issue into court litigation. As a result, a party might face costs from arbitration, including the arbitrator's fee, and then more costs if a party still proceeds to litigation.
  • Fairness: Consumers may have legitimate concerns about the fairness of being dragged into arbitration over a minor issue the parties could resolve in small claims court. Also, companies favoring arbitration may be more familiar with specific arbitrators and the process in general.
  • Speed: Just like they aren't always cheaper, arbitrations aren't always faster than litigation. This is more likely the case when there are multiple parties, multiple arbitrators, and complicated legal disputes.

Additional Disadvantages of Arbitration

Beyond the considerations mentioned above, there are other aspects of arbitration that can be disadvantageous:

  • Location: In the small print in a contract or mandatory arbitration clause requiring consumers to arbitrate their issues, there may be language specifying where an arbitration will occur. This location can sometimes be inconvenient to the average consumer, as it could be in another state, raising the cost and requiring time off from work.
  • Finality: As noted above, appealing arbitration awards is very difficult. Although less common, this can sometimes result in what may be seen as an unfair result. There may be only a small chance that a court can step in to correct the outcome.
  • No jury: Arbitration does away with juries entirely, leaving matters in the hands of an arbitrator. The arbitrator essentially plays the role of both judge and jury.

Wondering Whether Arbitration Is Right for You? Talk With a Lawyer

Sorting through the pros and cons of arbitration by yourself may not answer all your questions. Getting legal advice from an experienced attorney can help you assess whether the limited discovery of the arbitration process works for your case. A lawyer can help you understand arbitration clauses. They can give you a sense of the timeline associated with both court and arbitration proceedings. Visit our attorney directory to find a lawyer who can help you make the decision that is right for you.

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