Why Should I Arbitrate?

  A)    Arbitration vs. Litigation
  B)    Arbitration vs. Mediation
  C)    Additional Advantages
  D)    Possible Disadvantages

a) Arbitration vs. Litigation

Arbitration  Litigation
  • Process that generally results in final and binding award rendered by an arbitrator.
  • Private process, and as confidential as parties so provide.
  • Parties typically involved in the selection of the arbitrator(s).
  • Arbitrators often posses special subject matter expertise.
  • Generally, quicker and often less expensive.
  • Discovery not as extensive.
  • Decisions generally set no formal precedent and are private.
  • In some instances, parties can agree to limit the range of remedies that an arbitrator can award.
  • Award has high degree of finality.
  • A formal, inflexible process.
  • Generalist judge or jury decides in a public forum.
  • Broad right of appeal.
  • Broad discovery.
  • Generally more time consuming because it can entail docket delay, scheduling in large part outside parties’ control.
  • Often more expensive than arbitration.



(CPR Master Guide: Drafting Dispute Resolution Clauses)
 

b) Arbitration vs. Mediation

Arbitration Mediation
  • Presentations are made through attorneys; the parties play a secondary role.
  • The process is less flexible than mediation however, more flexible than litigation.
  • Ultimate resolution of disputes is in the hands of the arbitrator(s), not the parties.
  • The focus is on past circumstances, and determining issues of fact and law.
  • Solutions are limited by the original agreement of the parties and requests for relief, and usually consist of monetary damages.
  • Parties to dispute play a central role as active participants in the process.
  • Process extremely flexible and informal.
  • Parties control the ultimate resolution of disputes.
  • Emphasis is often on the interests of events or the parties and/or their future relationships.
  • Goal: Resolve problems in a principled fashion and move on.
  • Solutions are flexible.

(CPR Master Guide: Drafting Dispute Resolution Clauses)

c) Additional Advantages

Private
Arbitration is a private process, and as confidential as parties so provide, while litigation is a formal process conducted in a public courtroom.

Speed of Process
The arbitration process can be fairly quick. Once an arbitrator is selected, the case can be heard immediately. In a civil litigation, on the other hand, a case must wait until the court has time to hear it; this can mean many months, even years, before the case is heard.

Cost of the Process
The costs for the arbitration process are limited. Costs for litigation include attorney fees and court costs, which can be very high.

Selection of Arbitrator
Parties typically are involved in the selection of the arbitrators(s). Most practitioners, when confronted with a large or complex dispute, have greater confidence in a panel of three arbitrators than in a single arbitrator. Moreover, they usually prefer to permit each party to appoint an arbitrator. Arbitrating parties frequently choose arbitrators on the basis of prior professional or business associations and or pertinent commercial expertise. (CPR Master Guide: Drafting Dispute Resolution Clauses)

Use of Attorneys
Attorneys may represent the parties in arbitration, but their role is limited when compared to litigation.

d) Possible Disadvantages

Discovery
Discovery in arbitration is typically not as inclusive as in litigation.

Unlike litigation, where discovery is prescribed by rule or statute, in arbitration discovery requires planning by the parties, either in the clause in advance of the dispute or in a separate agreement after a dispute . . . Parties can plan for discovery through their choice of institutional arbitration rules. (CPR Model Clauses and Sample Language)

Availability of Appeal
Most users of arbitration find the finality of an arbitration award appealing. But some parties to major cases are concerned about the possibility of an aberrant award and would like to be able to appeal from such an award to a tribunal of outstanding appellate arbitrators.

In response to that concern, CPR has adopted the CPR Arbitration Appeal Procedure (“Appeal Procedure”) which is set forth, together with a Commentary. The Procedure may be invoked whether or not the original arbitration was conducted under CPR Rules.

CPR does not wish to encourage widespread appeals from arbitration awards. The Appeal Procedure (Rule 8.2) establishes relatively narrow grounds for appeal beyond the statutory grounds under Section 10 of the Federal Arbitration Act.

Section 10 of the Federal Arbitration Act: “The statutory grounds for vacating an arbitration award under Section 10 of the Federal Arbitration Act and state counterparts are limited to matters such as arbitrator corruption, fraud, evident partiality, misconduct and exceeding of powers. These grounds do not go to the merits of the award. The decision in Hall Street Associates L.L.C. V. Mattel Inc., No. 06–989, (March 25, 2008), bars parties from writing contracts that allow court review for arbitration awards.
 

(CPR Arbitration Appeal Procedure and Commentary)

The information and resources on this website should not be construed as legal advice or opinion, or as a substitute for the advice of counsel.