Arbitration is a method of resolving disputes between parties where an independent third party, known as an arbitrator or arbitration panel, listens to both sides of the argument and makes a decision. With this process, the arbitrator’s decision is binding, meaning that the parties involved must comply with their resolutions. While it is not as popular as going to court, arbitration is often used for resolving disputes in business deals, construction disputes, employment matters, and consumer disputes.
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How Does Arbitration Work?
When two parties agree to solve their dispute through arbitration, they sign a contract, known as an arbitration agreement, which outlines the details of the process. Usually, the agreement specifies the rules to be followed in the arbitration process, the name of the arbitrator, the date, and where the arbitration proceedings will take place.
During the arbitration, both parties present their cases to the arbitrator. They may have lawyers to represent them, present witnesses, and evidence. The arbitrator listens to the evidence and arguments and makes a binding decision, known as an arbitration award. The arbitrator’s decision is final and cannot be appealed.
Advantages of Arbitration
Arbitration process offers numerous advantages to dispute resolution over traditional litigation in a court. Some of the advantages include;
Confidentiality
The arbitration process is private, and the proceedings and the decision do not go public. This confidentially element means that the parties involved can keep the details of the dispute between them.
Control
Both parties involved in the dispute can control the process and the outcome of the arbitration. The parties can agree on the rules and setting to be followed and choose a mutually agreeable arbitrator.
Speed and Cost-Effective
Arbitration is often more expeditious than taking legal matters in court since the proceedings are less formal. Arbitration also cuts down on the legal cost and expenses of going to court, including discovery costs, attorney’s fees, and court fees.
Expertise
The arbitrators conducting the proceedings are often legal experts or specialists in fields such as construction, employment law, and others, making them knowledgeable and experienced in handling disputes.
Disadvantages of Arbitration
While arbitration is an expedient and less costly method of resolving disputes, it also has its downsides. Some of the disadvantages of arbitration include;
Limitations
The arbitration process is not suitable for all types of disputes. For example, the arbitrator may not have the legal authority to grant certain remedies or force the parties to take specific actions.
Lack of Appeal
In most cases, the decision of the arbitrator is final, and there is no appeal. This lack of appeal makes the arbitration process final and may be unfavorable to one of the parties involved.
Limited Discovery
The arbitral procedure is less formal compared to the trial in court. As a result, the parties may not have access to all the evidence or discovery procedures they need.
Cost-sharing
The parties involved may have to share the cost of the arbitrator, which might be expensive, particularly for complex disputes.
Conclusion
Arbitration is an effective and efficient method of resolving disputes between parties, but it is not suitable for all types of cases or disputes. It is essential to understand the advantages and disadvantages of arbitration before deciding to use it as a dispute resolution mechanism. Consideration should be made as to whether arbitration is appropriate for a particular case and if it is worth the costs versus the potential benefits.