What are the advantages and disadvantages of arbitration?

There are numerous advantages and a few disadvantages of arbitration, as follows:

• Expertise of Arbitrators
• Certainty of Resolution 
• Lower Costs 
• Greater Privacy 
• Maintain Relationships

Each of these aspects are discussed below.

Are Arbitrators Experts?

Arbitrators are generally chosen based upon their expertise in the subject matter of the dispute. This is a key advantage over litigation, which generally involves the use of jurors as fact-finders. The jurors will lack the subject-matter knowledge of professional arbitrators chosen by the parties. Some argue that this fact makes it less likely that jurors will arrive at a fair and just result.

Do Arbitrations lead to Resolution of the Dispute?

Similar to litigation, in an arbitration, the parties lose control of the dispute resolution process. The benefit of this situation is that the arbitrators will decide the dispute and issue an award. This may give the parties comfort in knowing that the legal dispute will be resolved.

What is the Cost of an Arbitration?

It depends upon the nature and complexity of the matter. There may be significant cost savings associated with arbitrating rather than litigating a dispute. While the parties generally share the responsibility of paying the arbitrators, it avoids many of the court fees, legal fees, and other expenses associated with going to trial. The primary point of savings is the lack of formality in the discovery process. Generally, the arbitrators control the proceeding and request from the parties whatever evidence they require in deciding the dispute.

Does Arbitration offer Privacy? 

As with other types of ADR, arbitration is a private process. The parties do not have to disclose the dispute or any of the facts of the situation to the rest of the world. Privacy in arbitration offers the same advantages and disadvantages as mediation.

How does Arbitration Affect Relationships between the parties?

Arbitration can have the effect of preserving on-going business relationships. The parties may feel comfortable that the dispute is not decided arbitrarily, as experts are reviewing the facts and deciding the case. In this way, the parties are less likely to feel that they were treated unfairly by the system.

The above aspects of arbitration may be seen by a party as an advantage or disadvantage. For example, a party may hope to sway jurors by appealing to their emotions. This is not as easy when dealing with expert arbitrators who are more likely to apply the law without regard to personal emotions. Further, an arbitration will lead to a decision on the dispute. One party may see this finality as a benefit, while other parties may want to retain the ability to continue negotiating a settlement.

Related Topics

• Alternative Dispute Resolution (Intro)
• What is the Settlement of a Legal Dispute?
• Demand Letter
• What is Mediation?
• What are the advantages and disadvantages of Mediation?
• How Do Parties Initiate Mediation?
• What is the process for carrying out a mediation?
• What is the process for challenging a mediation agreement?
• What is Arbitration?
• What are the Advantages of Arbitration
• Initiating Arbitration Voluntary and Statutorily Mandated Arbitration?
• What is the procedure for carrying out an arbitration?
• Rules governing the arbitration Federal Arbitration Act
• What is the Judicial Review of Voluntary Arbitration?
• What is the Judicial Review of Mandatory Arbitration?
• What is Review under the Federal Arbitration Act?
• How are Arbitration Awards enforced?