What is Arbitration? Why am I here?

Arbitration is a form of alternative dispute resolution (ADR) that serves as a substitute to litigation in the courts. The parties to a dispute refer it to one or more arbitrators by whose decision (the "award") they agree to be bound. After a shorter discovery period, the parties will have a “hearing,” which is essentially a trial before the arbitrator. This method is often preferred for its efficiency, confidentiality, and the expertise of arbitrators in specific fields.

Getting Involved in Arbitration

Entering into arbitration typically occurs in one of two ways. The most common method is through an arbitration clause within a contract, which stipulates that any disputes arising from the agreement will be resolved through arbitration. Alternatively, parties can agree to arbitrate a dispute after it has arisen, even if there was no prior agreement to do so. This is one reason it is extremely important to review any contracts you are using or signing. 

Major Providers of Arbitration Services

Several organizations offer arbitration services, each with its own set of rules and procedures. The most notable include:

• American Arbitration Association (AAA): One of the largest providers of ADR services in the U.S., offering a wide range of arbitration and mediation services.

• JAMS: Formerly known as Judicial Arbitration and Mediation Services, JAMS is renowned for its panel of highly experienced arbitrators and mediators.

• International Chamber of Commerce (ICC): The ICC International Court of Arbitration is recognized globally, handling international business disputes with arbitrators from various legal traditions and cultures.

There are also many local and international arbitration providers; the ones listed above are the largest and most utilized. Each provider of arbitration has its own rules that the parties must abide by, which work similarly to the court’s rules of civil procedure. 

Advantages of Arbitration

Arbitration offers several benefits over traditional court litigation:

• Speed: Arbitration can be significantly faster than court proceedings, allowing for quicker resolution of disputes.

• Privacy: Unlike court cases, which are public, arbitration proceedings are private, offering confidentiality to the parties involved.

• Flexibility: Parties have more control over the process, including the choice of arbitrator and the rules governing the proceedings.

• Expertise: Arbitrators often have specific experience in the subject matter of the dispute, which can lead to more informed decisions.

Disadvantages of Arbitration

Despite its benefits, arbitration is not without drawbacks:

• Limited Discovery: The discovery process in arbitration is typically more limited than in court, which can disadvantage parties needing extensive evidence.

• Lack of Precedential Value: Arbitration decisions do not create legal precedents, which can be a disadvantage for developing consistent legal principles.

• Expense: In Arbitration, the parties or one party is responsible for paying the cost of the arbitrator(s) fees; meaning the party(s) are paying their attorney plus another attorney who is acting as the arbitrator. 

• Limited Judicial Review: The ability to appeal an arbitration award is very limited, which can be problematic if the arbitrator makes a legal error.

Conclusion 

In conclusion, arbitration offers a viable alternative to traditional litigation. However, it is extremely important that you understand the arbitration process and what exactly you are agreeing to. You should carefully select an arbitration provider that meets your business goals, not relying on ‘industry standards’ or what is in a generic contract.