Whether a dispute will be litigated or arbitrated is usually determined long before the dispute even arises—at the time a contract is negotiated, drafted, and executed. Companies and practitioners alike routinely include an arbitration provision in business contracts as an almost knee-jerk reaction during the drafting process. Arbitration is often thought of as faster, cheaper, and less risky. But is this accurate? And is this “one size fits all” attitude of inserting arbitration clauses in most business contracts really the best approach to the resolution of disputes that arise out of business transactions? There are sometimes advantages to arbitration over litigation but there also can be disadvantages in arbitration. Both warrant discussion and evaluation prior to the selection of a forum.
Five Advantages of Arbitration
(1) Participation in the selection of the arbitrator(s). Unlike the process in court where a judge is typically randomly assigned to each case, the parties to an arbitration have an opportunity to participate in the selection of the arbitrator or the panel of arbitrators. Whether through joint agreement or selection by ranking, you have an opportunity to consider which arbitrators you think will be the best fit. This can be of great value if a party is able to, for example, select or eliminate arbitrators with experience in a particular field or whose background you believe may lead to a disadvantageous perspective. Resumes are typically provided to parties and other research regarding the arbitrator can be beneficial as well, such as reviewing articles the arbitrator may have authored or analyzing the types of speaking engagements in which he or she participated. By talking with colleagues that have had firsthand experience with the arbitrator, information about the arbitrator’s approach to the process can be gleaned. This can include, for instance, attitude towards discovery disputes or dispositive motions. Whatever approach parties and their attorneys take in the arbitrator selection process, there is a strategic decision to be made with arbitration that would be unavailable in the courtroom.
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