Informative Advantages & Disadvantages of Arbitration (ADR)

Arbitration is a form of alternative dispute resolution (ADR). It is among different types of dispute resolution techniques that act as a means for different disagreeing or contesting parties to come to an agreement without resorting to litigation. It is adapted to not only help settle disputes but also to ease the burden of the court system itself. So let us look at the advantages and disadvantages of arbitration.

WHAT IS ARBITRATION?

The settling of a dispute between two parties by taking the help of an arbitrator is called arbitration. A person comprising a group of people chosen to settle the dispute is an arbitrator. According to the World Intellectual Property Organization, arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. It is a private dispute resolution procedure and therefore, does not require the parties to go to court to settle the matter.

So what happens is that 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. The arbitrator then has to give a fair solution to end the dispute. 

The main characteristics of arbitration is that it has to be consensual, neutral, confidential, and the parties must choose the arbitrator(s) mutually. Also, the decision of the arbitral tribunal (panel of adjudicators that resolve the said dispute) is final and is enforced.

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Advantages & Disadvantages of Arbitration

ADVANTAGES OF ARBITRATION

Cheaper and faster

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

Peaceful

The proceedings of arbitration are usually peaceful because the disputing parties have chosen the arbitrator. They are allowed to participate in the procedures. Additionally, they are 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. As a result, 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. In other words, the hearings take place according to the availability of the parties involved and the arbitrator. It can also be conducted on weekends if necessary.

Simple rules

The rules of arbitration are kept simple for convenience. As a result, 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 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. In other words, it may actually not be according to the law.

Advantages & Disadvantages of Arbitration

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. Hence, 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 further. 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. So, they get a part of what they asked for. Therefore, this usually makes the parties unhappy as they feel that they didn’t get complete justice.

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Pros and Cons

PROS

CONS

Cheaper and faster

Not very transparent

Peaceful

Award may not be based on law

Not made public

Panel of arbitrators cost more

Flexible

Decision cannot be altered

Simple rules

Splitting the baby

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