To Arbitrate or Not to Arbitrate – That is the Question

By Kristy Achey, Advanced Certified Paralegal

To Arbitrate or Not to Arbitrate – That is the Question

Arbitration has become a hot topic. Will arbitration save us money? What are the pros? What are the cons? The answer is not black and white. There are several factors to consider when determining whether or not to agree to arbitration as a form of dispute resolution.

A common misconception is that arbitration is less expensive than litigation, which is not necessarily the case. Arbitrators can charge anywhere between $1,000 – $12,500 for his/her services (three times that amount if a panel of arbitrators is involved). In most instances, the parties involved will also hire a lawyer to represent them throughout the process, which adds on additional attorney’s fees and costs. The notion that arbitration is a cost savings comes from the assumption that litigation is a longer, more drawn-out and complicated process. Arbitrations can usually be scheduled sooner because there is no need to plan around the availability of the courts and some arbitrators will even allow for the cases to be hearing on weekends and/or holidays.

Other factors such as confidentiality and governing law should be taken into consideration prior to agreeing to arbitration as a method of dispute resolution as well. Arbitration allows each party to avoid the required court rules and procedures. Document requests and calling witnesses can be achieved by placing a simple phone call. Often times one or more of the parties are concerned that the subject matter of their dispute is personal, embarrassing and/or revealing of private/confidential information. Court records are easily accessible to the public and arbitration can avoid the filing of a lawsuit altogether. If you are an employer in a state which is known to favor the employee, you probably want to avoid litigation in that state. Arbitration could be your better option in this instance.

One last factor to consider is that arbitration is binding, unlike litigation which allows for an appeal process. Regardless of your decision to require litigation/arbitration, most attorneys will recommend mediation as a condition precedent. Mediation can be a big cost, time and effort savings for all involved.

Just remember that, today, most of the contracts you come across will contain language requiring arbitration. Read through your agreements before signing to know exactly what you are agreeing to. If you are unsure, it is always best to contact an attorney for interpretation. At the very least, take it upon yourself to strike any language which is not acceptable, not just an agreement to arbitrate, but any other language you may not be familiar with as well.

 

Disclaimer: This article provides general information and materials related to contract management. This article does not provide legal advice. Agile Contract Management is not a law firm nor does it provide legal advice. You should contact an attorney to obtain advice with respect to any particular legal issues or questions.

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