An alternative dispute resolution allows for opposing parties in a particular disagreement to reach an agreement without having to endure litigation or court proceedings. Arbitration is one of the forms of alternative dispute resolution that may often be employed to resolve a matter outside of the courts. Arbitration is a method that introduces a third party that hears each party's case, and arrives at a decision which is legally binding to both sides.
Arbitration will commonly be employed for commercial disputes, particularly international commercial transactions, where court litigation and procedures will prove to be too time consuming and incur monetary losses for both parties. Arbitration is to be conducted by an arbitrator or AN arbitral tribunal, and the nature of an arbitration can be voluntary or mandatory by law.
Furthermore, there instances in which parties may decide to enter the alternative dispute resolution on non-binding terms. In other words, the decision and imposition derived by the arbitrating committee may not necessarily be adhered to by either parties, and such deviation is not considered to be punishable by law. However, binding decisions issued by an arbitrator are otherwise considered not be subject to an appeal; the decisions rendered are final.
Arbitration has certain advantages and disadvantages, which may affect the decision of a certain party to enter such a method of alternative dispute resolution. Depending on the nature of the dispute, other forms of alternative dispute resolution may be employed. However, some advantages offered by arbitration include:
The nature of the dispute involves highly technical subjects, in which case an arbitrator may be appointed that is an expert or has intensive knowledge or experience in that particular area. Having a qualified arbitrator will prove beneficial in properly resolving the dispute.
Arbitration is generally employed because of its ability to render decisions quicker than those that are taken to the courts.
Arbitration offers the potential of curtailing expensive fees and costs that often occur in court litigation.
Arbitration procedures often occur away from the public eye, thus making the proceedings and subsequent decisions or awards confidential.
Awards granted through an arbitration procedure are generally much easier to enforce on an international level then a judgment rendered by a court.
Arbitration procedures leave little room for appeals, unless in certain extenuating circumstances.
Even though arbitration has proven and distinct advantages, depending on the nature or context of the disagreement, other alternative dispute resolution options may prove to be more advantageous. Some of the disadvantages of arbitration are:
Depending on the nature of the dispute, arbitration procedures can prove to be highly complex.
The arbitration process may prove to be one sided if a particular party is backed by power law firms or corporations, which give a party a powerful advantage in the proceedings.
The parties may be subjected to cover the costs of the arbitrators, which can limit a party's option to enter such an arbitration.
Though also an advantage, limited room for appeals can prove to be an obvious disadvantage to the losing party in the arbitration process. A judgment or ruling is legally binding, even if such is rendered in error.
In the case that multiple arbitration members are needed for an extremely complex case, it may lead to a longer procedure or delays in the decision making of the arbitral committee.
Discovery in arbitration can prove to be very limited or non-existent.
If in the exceptional case than an appeal can be sought for arbitration judgment, the costs incurred by bringing the appeal to the courts can prove to be extreme and more time consuming, thus making the arbitration process