Informative Advantages & Disadvantages of Arbitration (ADR)


The settling of a dispute between two parties by taking the help of an arbitrator is called arbitration. A person or a body comprising a group of people chosen to settle the dispute is the arbitrator. A dispute goes to an arbitrator with the consent of both the parties. It is a confidential procedure where the arbitrator has to be agreed upon by the disputing parties. It is then the duty of the arbitrator to give a fair solution to end the dispute. We will now see the advantages and disadvantages of arbitration.


Advantages of Arbitration

  • Cheaper and faster

Going for arbitration is cheaper than litigation. Going to a court to settle a dispute is a lengthy process. First, you file the case and then follow the procedure called discovery. In this, the two sides of the case are properly analyzed. It is then followed by a number of other procedures before the final judgment is made. But arbitration takes lesser time to come to a decision.

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  • Peaceful

The proceedings of arbitration are usually peaceful because the disputing parties have chosen the arbitrator. They are allowed to participate in the procedures and sometimes involved in the framing of the resolution. So, it is expected of them to work together peacefully rather than being in a hostile mood.

  • Not made public

The hearing of the arbitration is not a public affair. It is not even allowed to be recorded. The confidentiality of the procedures is maintained till the end. An agreement is first made with the arbitrator that the dispute and its resolution will be kept confidential.

  • Flexible

Usually court hearings are not very flexible. The date and time will be decided according to the convenience of the court. But arbitration is flexible in its working. The hearings take place according to the availability of the parties involved and the arbitrator. It can even be conducted in weekends if necessary.

  • Simple rules

The rules of arbitration are kept simple for convenience. It does not resort to the procedure of discovery which involves recording responses, producing documents and even deliberately delaying the procedures. Instead of written orders, a phone call does the work.

Disadvantages of Arbitration:-

  • Not very transparent

As the hearings are not recorded, it seems that the proceedings are not transparent. Everything is held in private making it difficult to access the proceedings. This may be considered as beneficial by some people while some others believe that the decision can be biased.

  • Award may not be based on law

Arbitration takes place in a very informal way. Since it is not related to court, it need not abide by the rules of the law. Therefore, arbitration award or the final judgment may be purely based on the principles of justice followed by the arbitrator and not according to the law.

  • Panel of arbitrators cost more

Even though arbitration is considered cheaper than going to a court, it becomes expensive if there is a panel of arbitrators rather than a single person. This can also make the proceedings time consuming because everybody has to go through the details and agree upon a common decision.

  • Decision cannot be altered

In arbitration, the arbitrator’s decision is taken as final. It is almost impossible to give it a second thought. If the disputing parties feel that the decision is unfair, they can do nothing about it. Unlike courts, there is no provision of appeal in arbitration.

  • Splitting the baby

As mentioned, the final decision depends on the principles of fairness of the arbitrator. It may so happen that he tries to make both parties happy by splitting the baby into two. Thus, baby awards are given which means that no party is completely satisfied. They get a part of what they asked for. This usually makes the parties unhappy as they feel that they didn’t get complete justice.