The Pros and Cons of Arbitration

When resolving a legal dispute, parties can consider arbitration if their business contract includes an arbitration clause. Arbitration is a private method of legal conflict resolution where a dispute is submitted to an arbitrator(s), a neutral third party who handles the case, by involved parties. The dispute is settled outside of the judiciary court by arbitrators who render an arbitration award. Although arbitration may be an attractive option for those seeking to resolve a conflict quickly and confidentially, organizations considering this option must understand the potential positives and negatives of the process. Read below to understand the pros and cons of legal arbitration and how the Dallas law firm of Ritter Spencer PLLC can help parties involved in a legal dispute make the right decision for their business. 

The Pros of Arbitration

  1. Time Going through traditional legal systems to address conflicts can be time-consuming. Court calendars are commonly backed up with numerous cases, especially as a result of the COVID-19 pandemic. Depending on the nature of the dispute, a conflict may take several months or even years to be resolved. Arbitration is usually a quicker process with less discovery, saving businesses time that could be used elsewhere. To ensure that arbitration is possible, parties need to work with an experienced team of attorneys and ensure their business contracts have arbitration clauses. 
  1. Confidentiality
    Parties might want to resolve their issues outside of the public court system to address disputes more discreetly. Arbitration proceedings are usually private, especially when involved parties intentionally keep proceedings and resolutions confidential. 
  2. Flexibility
    Although arbitration is a formal process, the proceedings offer more flexibility than traditional court proceedings. The arbitrator(s) may be chosen by the parties involved in the dispute depending on the type of contract established beforehand. Traditional rules of evidence usually do not apply in arbitration proceedings. Additionally, arbitration hearings can be conveniently scheduled based on the availability of the parties and the arbitrator(s), rather than depending on the mandated schedule of a public court. 

The Cons of Arbitration

  1. Implicit Biases & Fairness
    An impartial arbitrator is ideal during arbitration proceedings; however, this intermediary could be biased if he/she is appointed by one party and may benefit one group over the other. Because arbitrations do not rely on impartial juries to make decisions, a final resolution is made by the arbitrator(s) alone, and their decision may be affected by unconscious biases. Additionally, one party may potentially have no choice but to default into arbitration, depending on the contract they have signed. 
  2. Finality
    An arbitration proceeding’s finality is likely to be positive for the party that benefits from the arbitrator’s decision; however, if a party feels like the decision is unjust, they may not have many options available to address their concerns. Arbitration proceedings are binding and both parties usually give up the right to appeal when they agree to this process. Therefore, parties have limited opportunities to appeal a decision made during arbitration proceedings. 
  3. Potential Costs

While some may believe that arbitration is less costly than traditional litigation, this may not always be the case. There are many fees associated with arbitration proceedings. Arbitrator fees, investing in an arbitration panel, and hiring an experienced business attorney are all potential expenses that each party may need to consider. However, parties that prioritize having reliable representation and maximizing flexibility set themselves up for arbitration proceedings to go smoothly. 

Hiring an attorney to represent you or your business during an arbitration proceeding can ensure you receive the necessary guidance throughout the process. Commercial litigation attorney David Ritter has over 25 years of legal experience in business litigation, business restructuring, and bankruptcy. From individuals and family-owned businesses to Fortune 500 companies, the team at Ritter Spencer provides unique insight for every case. Contact us for more information.

Ritter Spencer, PLLCThe Pros and Cons of Arbitration

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