Why Businesses Should Consider Arbitration Before Going to Court

lawyer between two parties

Although the business world may currently be in a transformative period, given Facebook’s relentless transformation into Meta and the volatile market conditions surrounding global economic recovery, the legal realm remains relatively unchanged. As such, court proceedings, settlement agreements, and handling lawsuits all still play a crucial role in the day-to-day operations of a company, tying into its sustainability and accountability.

However, one change in the approach to dispute resolution that’s been growing in popularity is seeking arbitration instead of the traditional means of litigation due to the immediate advantages of an arbitrator over your standard court. And while litigation won’t be going out of style any time soon, now’s the best learning opportunity to understand what makes arbitration better and some of the drawbacks it brings to the table too.

Arbitration Streamlines the Entire Process

On a more positive note, the most distinct advantage of utilizing a professional arbitrator as opposed to your typical legal process concerning a jury and judge is their ability to streamline the procedure and make circumstances more flexible. Namely, both parties receive the benefit of (1) quicker and easier to schedule dispute resolutions, (2) avoiding unnecessary public disclosure of said case, and (3) reasonable assurance of impartiality in the arbitrator’s final verdict.

  • Quicker and Easier to Schedule and Complete: Everybody knows that litigation can take forever to resolve and drain you of resources depending on the situation and your opposing party. However, if both parties are willing to compromise and come to an agreement, arbitration ensures a quicker and easier process for both ends. Plus, arbitration hearings and any discussions held can be pursued at the convenience of either party involved, giving everyone equal opportunity and flexibility to work things out.
  • Avoid Any Unnecessary Public Disclosure: Confidentiality is held in high value by today’s standard. While a public resolution has its benefits, some legal cases can dwell on sensitive information that should only be made known to a select few people. In contrast, litigation almost always goes through the control activity of discovery, and everything learned will be made known to the public, a natural disadvantage to companies that demand otherwise. As a result, arbitrators work best for those avoiding the public eye.
  • Reasonable Impartiality in Unbiased Conclusions: Last but not least, one of the most important advantages of arbitration over other alternative methods of dispute resolution is its reasonable impartiality in unbiased conclusions. Unlike negotiation or mediation, where final terms are not legally binding nor compulsory, an arbitrator’s decision is usually the final say on the matter. As such, when both parties can attest that each other’s expectations are respected, you also preserve the relationship and strengthen the partnership between two businesses.

Of Course, Arbitration Is by No Means Perfect

Likewise, regardless of the potential advantages arbitration can provide over litigation and other ADR methods, relying on the expertise of an arbitrator is by no means perfect and experiences its fair share of drawbacks. And depending on the circumstances associated with the lawsuit and legal matters in question, some of the disadvantages you must expect are (1) unfair and unequal settlement clauses, (2) limited scope and substantive measures, and (3) limited room for correction and appeals after the fact.

  • Unfair and Unequal Settlement Clauses: Questionable fairness can happen in many ways in arbitrations, and whether that’s the result of an unskilled arbitrator, the presence of an ulterior motive, or stipulations directly in favor of the other party, some settlement agreements may come out unjustifiable. When this happens, neither party will feel like budging, causing a stalemate, and making arbitration efforts futile due to the lack of cooperation.
  • Limited Scope and Substantive Measures: Unlike your standard litigation process that offers all manner of legal counsel and services, arbitrators only have a limited scope and so many substantive measures available. As a result, you might not receive the same comprehensive understanding that you would have expected otherwise, which could hurt you in the long term because of its unpredictability and zero reasons to comply with rules of evidence.
  • Legally Binding with Limited Room for Correction: Although being legally binding can be seen as a benefit for many businesses, anything after the arbitrator’s conclusion or resolution for the matter can’t be superseded with appeals or corrections. And while these may be seen as a form of protection, you will need to go through grueling hours of legal effort and preferred process servers to remedy the finality clause.

Weigh Your Options and Choose Wisely
agreement between 2 party with a signed agreement

At the end of the day, there’s a time and place for all methods of resolving disputes and handling lawsuits. Whether that’s arbitration, litigation, or even negotiation, you must weigh your options and choose wisely. Circumstances differ from one company to the next, and going through each detail is key to reaching any form of success.

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