When Arbitration is Appropriate

Arbitration is sometimes referred to as the opposite of litigation. A neutral third party or panel of third parties are hired to hear both ends of an argument and make a fair decision, based on each party's presentation. Arbitration is beneficial to both parties involved, because it is cheaper, faster, and offers more privacy.

What are the Benefits of Arbitration?

The most noticeable benefit of arbitration over litigation is its cost and time effectiveness. Lawyers do not have to be hired to spend hours reviewing cases and making arguments in a courtroom. Also, the individual parties are able to work around their own schedules, instead of waiting for several appointments in an overbooked courtroom. The arbitration is also private, and therefore not open to the public or the media without the expressed permission of both parties.

Scenarios Where Arbitration is Appropriate

The following are some common situations where opposing parties agree that arbitration would be preferable to litigation:

  • When parties cannot agree on the appropriate jurisdiction- this is especially useful in international cases, where one or both parties may feel uncomfortable with the court system in the particular country that has or may have jurisdiction.
  • When the proceedings would be entirely too expensive or time-consuming- most parties can agree that they would like to save money and time by going through a relatively short arbitration meeting, versus several court hearings with expensive lawyer fees.
  • When the arbitrator should be a person with expertise in the dispute- a judge or legal professional does not have to oversee an arbitration meeting. Oftentimes, it can be a specialist in the area that concerns the argument.
  • Where both parties require confidentiality and privacy- again, these meetings are entirely private and closed to the media.
  • When one or both of the parties wishes to have a final verdict with no chance of appeal- this also cuts down on cost and the amount of time spent deciding a case.

Scenarios Where Arbitration is Not Appropriate

Likewise, there are many reasons why arbitration would not be the best solution to an argument. If the case is too complex to be sorted out in one meeting, or if one party would like to retain the right to appeal a decision, litigation would be more beneficial. Also, if more than two parties are involved, or if certain entities lack the ability to enter arbitration, this form of alternative dispute resolution may not be entirely feasible.

Though arbitration has many advantages, it is wise to consider all of the options when preparing to begin arbitration. Knowing the major differences between arbitration and litigation can be a valuable asset and a great time and money saver.