Usually, when people think of attorneys, they think of litigation by default: two sides in a courtroom, battling against each other, with one attorney representing each party. However, while litigation is perhaps the best known form of legal proceedings, it is far from the only mode in which issues between conflicting parties can be resolved. In fact, litigation, while sometimes necessary, is a comparatively extreme measure which is oftentimes costly, unpredictable, time-consuming, and emotionally draining. Furthermore, litigation unfortunately has a tendency to leave “bad blood” between the two clashing parties, and can damage future relationships between opposing sides.
For one, some, or perhaps even all of these reasons, some individuals may wish to seek alternative methods of conflict resolution, such as arbitration.Arbitration is a form of dispute resolution outside the government-supported courtroom. The rules are different, but the objective remains the same. Our lawyers represent clients in many forms of alternative dispute resolution, including arbitration.
Arbitration is commonly called for in insurance coverage disputes because many insurance policies specifically require arbitration to be used to resolve any disputes that might arise in regard to insurance coverage.
Arbitration has the advantage of being “official” from a legal standpoint, without sparking the negative feelings that litigation tends to provoke. But how does arbitration work, and what are its strengths and weaknesses?
How Arbitration & Mediation Works
Arbitration is one of three basic types of conflict resolution in the legal world, along with litigation and mediation. Litigation is at the most “extreme” end of the scale, in terms of cost, time, and stress. Mediation is a largely DIY procedure at the opposite end of the scale. In mediation, two parties sit down with one or more mediators, and work together to reach a resolution that seems reasonable to everyone involved, rather than waiting for a judge to make a decision for them. Arbitration is somewhere in between mediation and litigation.
In arbitration, one or more arbitrators are appointed to oversee a case. Most commonly, arbitrators are selected from a list of names submitted by the parties involved, and the arbitrator for each party will join to select a third, overall arbitrator.
The rulings of a judge in litigation are, of course, legally binding. Mediators do not review evidence, and the outcome of mediation, whatever it may be, is generally not legally binding. In arbitration, the arbitrator does act similarly to a judge in that they will listen to arguments, review any evidence presented, and make ultimate decisions. The outcome of the arbitration will be decided by the arbitrator majority vote.
Pros of Arbitration
- Arbitration is generally less expensive, hostile, stressful, and time-consuming than litigation. Additionally, in the long-term, arbitration can preserve a relationship that litigation might have destroyed, which is particularly important when the parties in conflict are family members, business partners, etc.
- Arbitration is more flexible than litigation in terms of scheduling. In arbitration, meeting rigid court dates becomes a non-issue. This can be especially advantageous in cases where one or both parties have a hectic lifestyle (e.g. doctors who have to be on call).
- Arbitration offers more privacy than litigation. Sometimes, legal issues can have an embarrassing, intimate, or sensitive nature. If people wish to reduce the how broadly information is broadcast, the confidentiality of arbitration can be very appealing.
- Arbitration carries simpler requirements than litigation. Litigation is jam-packed with tight deadlines, intimidating attorneys, legal jargon, and complex rules pertaining to evidence and testimony. For these reasons, litigation can be very overwhelming to individuals with no experience with a court of law. By comparison, the rules of arbitration are much more relaxed and easier to understand.
Cons of Arbitration
- Arbitration can suffer from a subjectivity. Typically speaking, arbitrators are chosen by the parties involved. Because of this, there can be a risk of partiality.
- Arbitration is a gamble. Of course, no one can ever be sure of the outcome of a legal issue. However, because arbitration is confidential, if one of the parties involved is concerned that an arbitrator’s decision is unfair or otherwise compromised, they will not be able to seek a judgment in court. Appealing an arbitration decision, no matter how “bad,” is extremely difficult.
- Arbitration meeting places can be inconveniently located. Sometimes in an arbitration clause, arbitration is mandated to be held in a location that is difficult for an involved party to access. The arbitration location can even be out of state.
- As you can see, arbitration & mediation has both benefits and pitfalls. These should always be carefully evaluated when you are deciding whether arbitration is appropriate for your circumstances.