What Is Arbitration Exactly?

What Is Arbitration Exactly?

Unlike mediation, however, where the parties decide the outcome by agreement (or by failing to agree), in arbitration a neutral third party, the arbitrator, makes the decision. Acting sort of like a private judge, the arbitrator actually hears the evidence and decides the case, and his decision is generally binding on the parties. Cases can be referred to arbitration only when the parties agree--often in a contract entered into before the dispute arises but sometimes even afterward. Often parties to a contract that requires that disputes be arbitrated rather than litigated will try to settle their dispute in mediation and proceed to arbitration only if the mediation fails to result in a settlement.

What are the advantages of having your case decided in arbitration rather than in court?

  • Speed-- A case that is arbitrated can be completed much more quickly than a case that is tried in court. A judge has a docket with other cases that may have priority over your case, meaning you may have a long wait until trial. An arbitrator, on the other hand, works for the parties and their lawyers, and the process can be shaped to provide for a quick conclusion.

  • Cost-- An arbitration procedure can be structured to reduce cost by minimizing the amount of time and legal fees spent on discovery and other procedures prior to trial. And the trial itself can be streamlined by such things as relaxing the rules of evidence.

  • Privacy-- An arbitration and its result can be kept confidential. A judicial trial is conducted in a public courtroom.

  • Selection of neutral-- The arbitrator is normally someone selected by the parties. If you go to court, you will almost certainly have nothing to say about which judge tries your case. Arbitration allows you to pick someone who has some knowledge about the subject matter of your case.

  • Finality-- Once the arbitrator renders his decision, the case is pretty much over. It's nearly impossible to get an arbitration award overturned.

But while arbitration has distinct advantages over the court system, like almost anything, it has its disadvantages, too:

  • Paying the arbitrator-- A courtroom judge works for the government; the parties don't have to pay him. They do have to pay the arbitrator. Normally, the other costs saved in arbitration compared to the cost of litigation dwarf the cost of the arbitrator, but everyone needs to remember that the arbitrator's fees must be included in their budgets.

  • No appeal-- The arbitrator's decision is essentially non-appealable, no matter how gravely you think--perhaps accurately--that the arbitrator has misconstrued the evidence or misapplied the law. Arbitrators are often accused of "splitting the baby," rather than making a proper decision based on the facts and the law. If your arbitrator makes a decision that you think doesn't follow the law or the evidence, too bad.

Bob Berliner's exceptional legal and business background make him a superb arbitrator. He has the business experience and expertise to understand the issues in the most complex cases, and his legal abilities enable him to decide cases based on the evidence and the law; he does not need to resort to "splitting the baby." He acts as an arbitrator for the American Arbitration Association, for FINRA, the securities industry dispute resolution forum, in the Cook County mandatory arbitration program, and as a private arbitrator when selected by the parties. Acting as a private arbitrator, he recently decided a case where the amount in dispute exceeded $200 million.