Pros and Cons of Arbitration


There are several ways to settle a dispute and an arbitration is one of them. It is a way to reach an agreement regarding a problem without going to court. An arbiter, arbitrator or arbitral tribunal will look at evidence and decide on an “award.” Although arbitration was the usual way to resolve a commercial dispute in the past, it is now being used to settle consumer and employment issues.

Parties look to resolve disputes through arbitration because they have certain advantages over judicial proceedings. However, some would also argue that there are disadvantages over such a way to settle disagreements.

List of Pros of Arbitration

1. Arbitration allows parties to choose their own judge.
Unlike in litigation, parties who are in dispute with each other can pick their own judge when settling a disagreement through arbitration. This is useful in cases where the subject being disputed is really technical. For instance, an arbiter who has expertise in commercial property law can settle a real estate argument.

2. Arbitration is quicker than litigation in court.
A study by the Federal Mediation and Conciliation Services looked at two similar cases and found that it was settled around 475 days through arbitration compared to 18 months to three years in court.

Not only is arbitration quicker, it is also cheaper – at least usually. Arbitration has become more costly ever since lawyers – particularly experienced ones – have taken up the cause. Some arbitrators can charge up to $4,000 a day for their services. Costs also increase when parties in arbitration hires lawyers to help them settle a dispute. All that said, the overall cost of arbitration is still lesser than that of a court proceeding.

3. Arbitration is much more simpler.
The rules of evidence and procedure don’t apply in arbitration proceedings. In an arbitration, they are adapted to the needs of those who are involved. Also, the procedure called discovery (which involves depositions, interrogations and requests to produce documents) is omitted.

List of Cons of Arbitration

1. A decision made through arbitration waves parties’ rights to access the courts.
An arbitration can be voluntary or mandatory. In a mandatory and binding arbitration, the rights to access the courts by parties is waived. Parties also waive their rights to have their case decided by a judge or jury.

2. A decision that has been made cannot be overturned easily.
A third-party makes the decision and when it is an erroneous one, it is usually difficult to overturn. In an arbitration, there are limited venues for appeal. So if an award is unfair, there is little that the parties can do.

3. There is lack of transparency.
Usually, arbitration hearings are held in private and the decisions are not made accessible to the public. Although this may be considered a benefit by some people, others feel that the lack of transparency makes the process biased. The fact that decisions made in arbitration are usually not reviewed by the courts is also troublesome for some.