What is Arbitration?

The Law, Arbitration and the Legally Binding Process - 3 Things you need to know about ADR and Arbitration

 Those wary of long, elaborate court cases often turn to arbitration as a way of resolving their disputes. If you're deciding between arbitration and a traditional trail, consider that:

Arbitration Lowers Costs: Even On The International Level 

Arbitration agreements are often considerably less expensive than court cases. This has led them to be favored not only by individuals and companies, but often by governments, who attract investment by offering foreign corporations the right to arbitrate any legal disputes they have. The most famous example of this has occurred in Argentina, which allows corporations to dispute its laws at the World Bank's International Center for the Settlement of Investment Disputes, or ICSID. This allows companies to avoid paying 3% of their claims in fees to Argentine courts. Argentina, however, has often failed to deliver the payments that the ICSID has ordered it to make, prompting companies to demand that their governments revoke the country's trade privileges. 

What is Arbitration? How does the Arbitration process work in the law?

What is Arbitration? How does the Arbitration process work in the law?

Binding Arbitration is Final

Traditional legal cases often take years to resolve. Even if the court makes a definitive ruling, the losing party may appeal the decision, forcing both sides to continue devoting time to the dispute. By contrast, in a binding arbitration agreement, both parties promise to abide by whatever decision the arbitrator reaches, regardless of how the decision was made or whom it favors. For this reason, arbitration is popular among businesses, which cannot afford to spend much time in court and thus often insert an arbitration clause into all of their contracts. 

Non-Binding Arbitration is a Proving Ground

Individuals and companies that are wary of submitting to a single, binding decision still have the option of signing a non-binding arbitration agreement. Such an agreement allows them to submit a dispute to arbitration, consider the decision, and decide whether to abide by it or take the case to court. This provides a relatively inexpensive way for each party to assess the strengths of its case. If a party does not like the outcome but feels that it has a strong claim, it can go to court with a better sense of what it has to do to win. 

Arbitration is Flexible

Besides being quicker and cheaper than the typical court case, arbitration is also free from many of the time and procedural constraints of the courtroom. Whereas court cases must be held on days when the court's schedule is free, an arbitrator can meet with the disputing parties on whatever day is most convenient to them. The parties may also specify where they would like to meet. Likewise, arbitration usually does not involve discovery. The parties' attorneys can move directly to the parts of the case they consider most important, avoiding lengthy interrogations and negotiations over evidence. 

Arbitration Cannot Guarantee That Everyone Will Be Satisfied

Although most people would define arbitration as a means to find an agreement that works for everyone, this arbitration definition does not guarantee that either party will be happy with the result. This is especially the case when arbitration is used in major disputes over large money losses. In a recent financial dispute, for example, the investor Ahmed Hussein was awarded $2 million in arbitration with UBS AG. UBS rapidly sold its stock in Quality System Inc., a company that Hussein had invested in heavily in hopes of influencing its corporate strategy. UBS was unhappy to make the payment, claiming that it had done nothing wrong. Hussein, however, was also unhappy with the decision, claiming that it did not address his real grievance. The real problem with UBS AG's actions, he claimed, was that they disrupted his attempts to influence Quality Systems, not that they cost him money. Arbitration ended up leaving both parties dissatisfied. 


Settle the Dispute Group is an arbitration firm committed to resolving all arbitration disputes in a manner that benefits both parties. To learn more about arbitration and mediation, visit our website today.


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