How Arbitration Works

In today’s system, many people may find that the court system isn’t the answer to resolve a particular conflict, so they choose to go through arbitration. Most times, an approved arbitrator is a retired judge or a well-experienced lawyer, and there are also no juries in the arbitration proceedings. So in this article, we will be discussing how arbitration works and more. 

What is arbitration?

Arbitration is a type of dispute resolution, and it’s a voluntary process. Not only can arbitration be necessary for two individuals, but it can also be required for between two or more parties like insurance companies, businesses, and even disputes between consumers and large businesses. Arbitration sessions take place outside of the courtroom and are different compared to mediation.  One of the significant differences between arbitration and mediation is that the arbitrator can decide how the dispute is resolved, unlike suggesting how the parties can settle the case like mediation. 

Who can be an arbitrator?

Retired judges or experienced attorneys usually do the arbitration sessions. The information shared and decisions made are confidential through arbitration sessions, and the arbitration process occurs outside the courtroom.

Who can be an arbitrator

How does arbitration work?

As mentioned earlier, arbitration doesn’t involve any courtroom proceeding. So let’s take a look at this scenario. Person A and person B have a contract, and both parties are complaining and blaming each other over that contract. Both parties could settle for court but either didn’t want to go to court, so they came up with the idea to get an arbitrator to decide on their case. Both person A and B met at the arbitrator’s office, and person A presents why he was right, and after person B presents her evidence. 

At the end of the arbitration, the arbitrator decided, and person B won, so person A had to pay $10 000 for damages caused. Since person B won, it’s common to say that she received a $10 000 arbitration award, and person A has to pay as ordered by the arbitrator. If person A refuses to pay person B, person B will have to go to court, and the court will enforce the arbitration award to make person A pay. 

How does arbitration work

Why use arbitration?

There are many situations where to some people, arbitration may be beneficial, but always consider that no one can force someone to go to arbitration. The arbitrator has the power to decide just like the judge, and before either party proceeds to get an arbitrator, there must be an arbitration agreement. This arbitration agreement can arise either before or after the disputes arise. Compared to a judge, the arbitrator can go through the process a lot quicker. Most of the time, parties may somewhat rather their privacy because the arbitration is confidential between the parties.

Why use arbitration

Arbitration vs. litigation 

The difference between arbitration and litigation varies greatly, and either party may be suing each other to obtain their money or business assets, etc.  As we know, arbitration is a process done privately, and each party has to agree to bring their dispute to someone trained to decide the outcome of that dispute, and there is an expense that’s involved because the arbitrators’ fees need to be paid. 

Unlike arbitration, there are different types of litigation, such as business litigation, trust & estate litigation, etc. Litigation is the process of taking legal action, and compared to arbitration, it’s done in the public courtroom, and the state or taxes pay the judge.  

Arbitration vs. litigation 

How arbitration works – Pros and cons

Some persons may prefer litigation compared to arbitration and vise versa but which one works best for you at the end of the day is what matters. Arbitration has lots of benefits as well as disadvantages, so let’s just take a look at a few of the pros and cons of arbitration. 

Pros

  • Arbitration is a more effective way to resolve conflicts or disagreements, unlike lengthy trials and litigations. 
  • Compared to litigation going through arbitration is a lot less expensive.
  • There is more flexibility with the arbitration. Litigation is subject to the court’s calendar, while arbitration can be held any time of day.
  • Going through arbitration is a much simpler process.
  • Arbitration is private, and the result is confidential.
  • Sometimes the arbitrator can go through the arbitration quicker compared to a judge.

Cons

  • There is an uneven recourse with the arbitration.
  • With arbitration, you wouldn’t know who chooses the arbitrator.
  • Decisions made by the arbitrator may be biased.
  • The result sometimes doesn’t lead to legalistic decisions.
  • Going through arbitration can be costly compared to the courtroom.

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