Arbitration is becoming increasingly popular as an alternative to litigation to settle business disputes. Generally, when arbitration occurs it is because the original agreement that is the subject of the dispute includes a clause requiring arbitration. More rarely the parties will agree to arbitration in a separate agreement after the dispute has arisen. Arbitration generally involves the submission of the dispute to a panel of one or three arbitrators who make a binding decision that can be enforced in Court. Just like in a case tried in a court, the parties conduct discovery, take depositions, use experts where appropriate and present evidence under oath. Usually arbitrations are conducted under procedures and rules set by an organization such as the American Arbitration Association whose business it is to oversee alternative dispute resolution programs.
Arbitrations have both advantages and disadvantages over traditional court proceedings. Generally, the disputes resolve in a timelier manner, as you are not at the mercy of a Court’s overcrowded docket. However, they are often much more expensive. The filing fee generally depends on the amount of the claim and can be several thousand dollars. This is in contrast to the fee for filing a case in Court, which generally does not exceed $350.00. In addition, you have to pay for the arbitrator’s time and often a rather steep administrative fee to the agency overseeing the proceedings. These fees sometimes put the ability to obtain a resolution of a claim outside the reach of an individual or small businessperson. All of these things should be considered when entering into any contract containing an alternative dispute resolution clause. You should consider discussing your rights and obligations under such provisions with your attorney.
