Arizona Business Lawyer

Arbitration Vs. The Courts: Is One Better Than The Other For Resolving Business Disputes?

Arbitration is the submission of a dispute to one or more persons for a final and binding decision. The arbitrators’ decision is called an "award." Awards are made in writing and are generally final and binding on the parties in the case.

Frequently, business or employment contracts contain clauses that require disputes between the parties to be resolved through arbitration. Before agreeing to arbitrate consider the following:

Advantages of Arbitration:

1. Privacy. Arbitrations are conducted privately in the presence of one or more arbitrators. The proceedings are not open to the public unlike a court.
2. Cost Savings. Arbitrations are less formal than a court. Arbitration may cost less in terms of down time and attorneys fees. It depends on the nature of the dispute and the rules of the arbitration agreement. .
3. Time. Generally, a dispute can be arbitrated much quicker than going to Court. The parties choose the arbitrator and set the time for the arbitration to take place. There are limited appeal rights and thus finality may occur sooner.
4. Selection of the Arbitrator. The parties select the arbitrator, (whether one or more). Generally, the arbitrators will have experience over the subject of the dispute.

Disadvantages of Arbitration:

1. Additional Costs. The parties pay for the arbitrator’s time. The arbitrator’s fees can range from $1,000.00 to $3,000.00 or more per day depending on the type of arbitration and the number of arbitrators. Arbitration filing fees are more than court fees.
2. Decision may not be in accordance with the law. Arbitrators may not be required to render decisions consistent with the law, unless the parties agreed in advance on the type of decision to be rendered.
3. Evidence. Generally arbitrators do not follow the rules of evidence very closely. Thus, evidence that is inadmissible in court may be permitted in arbitration.
4. Limited Appeal. Appeals of an award are generally limited to showing the arbitrator acted with partiality or there was fraud or corruption in the process.

When deciding whether to arbitrate, consider, among other things, what rules will govern, such as the scope and extent of discovery, whether the award must be consistent with the law and whether the agreement to arbitrate is enforceable. Not all matters are subject to arbitration.