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What are the Benefits and Drawbacks of Arbitration?


Question: What are the Benefits and Drawbacks of Arbitration?
Arbitration is a form of alternative dispute resolution in which the two parties agree not to take their dispute to court, but instead to resolve the dispute by hiring an arbitrator to hear both sides. The arbitration process is shorter than litigation because many of the procedures of evidence are not included. The decision of the arbitrator is final and no appeal to the arbitrator's decision is possible. Many consumer, franchise, employment, and other business contracts include an arbitration clause; some of these clauses require mandatory arbitration.

Advocates of arbitration claim that it has these benefits over litigation (going to court):

  • The speed and informality of the process and its low cost, comparative to civil litigation, and

  • The control the parties have over the selection of the arbitrator.

On the other hand, those who argue against using arbitration cite these issues:

  • The lack of a formal evidence process, which means you are relying on the skill and experience of the arbitrator to sort out the evidence, rather than a judge or jury. No interrogatories or depositions are taken, and no discovery process is included in arbitration.

  • The lack of a formal appeals process, and the (usually) binding nature of the process. If you are a party to a binding arbitration and you want to protest the decision of the arbitrator, you may not be able to do so unless there is some reason to believe the arbitrator acted with malice or was biased.

If you are considering putting an arbitration clause in a contract, or if you are faced with having to sign a contract with an arbitration clause, consider these benefits and drawbacks in making your decision about whether to arbitrate.

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