In the fast-paced and competitive business world, conflicts and disputes are inevitable. Finding a fair and efficient solution is important to preserving business relationships when disagreements arise.
An increasingly popular way of solving business conflicts is arbitration.
What is arbitration?
Arbitration is a viable alternative to traditional litigation. It is a form of alternative dispute resolution (ADR) in which the parties agree to submit their dispute to a neutral third party, known as an arbitrator.
The arbitrator acts as a private judge, rendering a legally binding decision not subject to appeal in a court of law. This is to make this alternative efficient for businesses who want to solve their problems and move on with their lives.
Benefits of arbitration
Some of the key benefits of arbitration include:
- The parties choosing the arbitrator
- It can support the continuation of the business relationship
- It is confidential (unless and until one party seeks confirmation of the award)
- It is flexible
Downfalls of arbitration
Cost can be a significant pitfall of arbitration. Whereas filing an action with the district court requires paying a filing fee of a couple of hundred dollars, the filing fee for an arbitration is tied to the amount at stake and can be several thousands of dollars. The arbitration panel is also paid by the parties which can be tens of thousands of dollars depending on the length of the final hearing – costs which parties to litigation do not have to pay.
How does the arbitration process work?
The process of arbitration begins with the parties agreeing to arbitrate the matter. Often, you will find an arbitration clause in a contract that requires the parties to solve their issues in arbitration instead of suing each other in court.
The parties select an arbitrator based on the arbitrator’s experience. This is someone/people who both parties usually trust to be fair and neutral.
The parties present their arguments and evidence to the arbitrator to support their position. The arbitrator takes their time to listen, review everything and render a decision called an arbitration award.