What are the Advantages and Disadvantages of Arbitration?

Arbitration

Before knowing about the advantages and disadvantages of arbitration, you need to know what is arbitration. It is a form of the dispute resolution process which allows you to settle cases out of court. Arbitration provides a legally binding decision and allows parties to share their opinion and review their evidence.

International dispute resolution

The concept of arbitration is gaining momentum in the business world because it is a fast and less costly method of dispute resolution. Today International dispute resolution has made things easy when it is about taking an efficient and quick decision.

Arbitral tribunals have to choose the laws for the process of the law of the seat of arbitration. The model law on international commercial arbitration is a law from United Nations Commission. It means states can consider this law when modernizing and reforming their laws to meet the certain needs of international commercial arbitration.

Role of an Arbitrator

An arbitrator is a person who conducts the process of arbitration. An arbitrator is a person who resolves the dispute by issuing a decision that is binding. An arbitrator is a private judge responsible for resolving disputes. The parties can hire arbitrators and resolve their disputes. Parties usually take a mutual decision when appointing an arbitrator. An arbitrator reviews testimony and evidence presented by the parties and issue a decision according to that. An arbitrator makes a decision and serves as a judge in the arbitration process. An arbitrator has to follow the rules of a certain organization and take the final decision.

Sometimes a group of arbitrators is called neutral third parties. They settle the dispute between parties in conflict. The arbitrators listen to both sides in order to make a beneficial decision for both the parties. Arbitrators have a critical role in the whole process as they have specialized knowledge of particular businesses involving parties. The flexibility of the process makes arbitration one of the most preferred ways of dispute resolution. So, let’s talk about the advantages and disadvantages of arbitration in this blog.

Advantages of Arbitration

  1. Efficient – Arbitration is one of the easy and efficient methods of dispute resolution. A court trial date may take frequent visits to court, but an arbitration date is obtained within a few months. Also, arbitration hearings are convenient to schedule whenever concerned parties are ready for the hearing.
  2. Simple – Simplified rules of evidence and processes make arbitration one of the best methods of dispute resolution. The litigation process includes filing papers and attending tedious long court processes. On the other hand, arbitration does not strictly follow the rule of considering the evidence in proceedings. Arbitration is not a time-consuming and expensive procedure. It does not involve interrogating people and request for documents. You do not need to be worried about producing documents and arranging witnesses.
  3. Privacy – When many big names or well-known personalities are involved in the process of arbitration, it is obvious that they want to keep things confidential. Arbitration provides complete privacy to parties. On the other hand, if you go for court proceedings, there is a risk of losing sensitive business information to the public. Arbitration keeps you away from the public eye.
  4. Cost-effective – Arbitration is cost-effective and less expensive than litigation. Arbitration is often resolved more quickly than court proceedings and that is why it is the most preferred form of dispute resolution. Since arbitration takes less time, the fees of attorneys are greatly reduced. Jury trial in court proceedings takes cost and time. So, arbitration is better in many ways.

Disadvantages of Arbitration

  1. Binding – The decision in arbitration is binding and no side has the right to correct it. It gives limited opportunity to parties to correct the decision because they have to give up their right to appeal. They cannot correct a decision that they do not like.
  2. Fees – There have been instances when commercial arbitration proved to be more expensive than normal court proceedings. Better quality arbitrators demand fees that would sometimes exceed the normal court charges. In non-binding arbitration, the parties are free to appeal against the decision and go to court. This will naturally add up to the overall cost. Some arbitrators charge a lot for cases under employment law.
  3. Non-Reliable – Arbitration proceedings can be highly non-reliable and unpredictable because they generally produce unconventional solutions. The process does not follow formal rules and procedures involved in a courtroom trial. So most likely testimony of witnesses is presented without any cross-examination. An arbitrator can give unexpected solutions. That means arbitration has both pros and cons. So, it is better to evaluate these things carefully.
  4. Questionable- Judgement taken in arbitration can be questionable on many accounts. Arbitration proceedings are a private form of dispute resolution. This sometimes causes biased decisions. Also, lack of transparency and absence of a jury makes the process questionable and that is the reason, courts frequently question outcomes of arbitration. The arbitration process completely eliminates juries, gives complete control in the hands of an arbitrator. Thus, an arbitrator acts as a jury and judge both. He has complete control over the process.

    Conclusion

    In modern business transactions, arbitration plays a critical role and is one of the best ways of dispute resolution than litigation. It is true that there are many ways to handle a dispute. But arbitration is one of the best choices for people who do not want to waste time and money resolve their disputes.

Fredrik Jörgensen

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