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Commercial
  Arbitration

 

Commercial (adjective) : 1. of, or engaged in, commerce (all forms of trade and service); 2. intended to produce profit

Arbitration (verb) : 1. a settlement of a dispute by the decision of an arbitrator or a panel of arbitrators; 2. to make a decision on a conflict for the disputants

 

An arbitrator, or panel of arbitrators, hear arguments and then decide the outcome based on findings and law. The parties are then forced to accept the judgment just like in a court of law. This process is similar to the typical litigated adversarial process at court in two respects.  First, that opposing counsel advocate their clients cases and second, that a third party renders a supposedly impartial decision.  There are only two accountability mechanisms in the arbitration process. First, there is an arbitration appeal process which some say is more difficult, obstructive, and fruitless than the parallel process in a court of law. The second accountability mechanism lies only in the arbitrators self interest to be hired again to arbitrate and how that concern may influence their findings.

The chief features of the arbitration process are: 

         Each party hires representation to present their side of the case in terms of evidence and law.

         The costs and procedures for arbitration mirror those of litigation but the timeline is usually more rapid.

         A neutral third party arbitrator, or tribunal of arbitrators, is selected and hired to judge the case as the hired counsel present it on behalf of their clients.

         There are extremely important choices required concerning the process rules, the body of law to be applied, and the location to be used.

         Flexibility of process and structure in arbitration is better than court but far more rigid than mediation. 

         Parties to the conflict normally participate only through their hired representation, not personally as is possible in mediation.

         The critical expenses of time and money in arbitration are typically less than of court, but usually far greater than in mediation.

         The all important element of risk of receiving a favorable vs un favorable outcome in arbitration is roughly equal to that of trying the case in a court of law. This risk is not present in mediation.

         The negative residual effects of an arbitrated adversarial process are roughly equal to that of court litigation although confidentiality is generally better managed in arbitration than in court. Mediation has a tendency to improve relations between parties, and is better regarding confidentiality.

         Arbitrated decisions are usually quite final in terms of dependability when crafted correctly, and enjoy the force of law in terms of enforceability. By contrast again, mediation is not concerned with forcing anyone to do anything they have not agreed to accept.

         Arbitrated judgments often enjoy the force of law regarding enforcement like a judgment obtained from a court. This can be a paramount consideration in international or trans-jurisdictional cases. Mediated resolutions are usually simply honored by those who create them, obviating enforcement problems.

         If an arbitration goes unfavorably for a participant, going to court afterwards for another adjudication is extremely difficult, if not generally impossible. Court is always a possibility after a mediation attempt fails or a successful agreement is dishonored.

         Increasingly great care must be taken in selecting a neutral arbitrator due to emerging litigation practice focused on the disqualification of arbitration decisions by parties who did not "win." Disqualification is one of the most expeditious paths to nullifying an unfavorable arbitral decision.

         Mandatory arbitration is often initiated as result of an arbitration clause within contracts and is increasingly being scrutinized for legitimacy particularly in the area of consumer law. Some aspects of mandatory arbitration clauses consistently and dependably yield unfair findings against the consumer.

         Legislation has been proposed to reduce the exploitative aspects of mandatory arbitration clauses in consumer commerce due to the "risk management" potential for businesses.

Arbitration is a highly suitable option for resolving conflict under specific circumstances.  Arbitration is highly effective to address disputes among unwilling participants and especially so in trans-border and trans-jurisdictional matters.  Arbitration is usually more expeditious and economical than litigation, but typically far more risky and costly than mediation. 

Most parties seriously err by not trying mediation as a first resort. There is very little to risk, and everything to gain. The point is to take the opportunity to resolve the conflict with the lowest possible cost and risk while leaving all other more severe options available if needed. Mediation is rewarding in far more situations than we are conditioned to expect from our conflict participant perspectives. It can be an amazingly powerful procedure.

Arbitration usually culminates with a judgment to the advantage of one party and against the interests of another. It's a "win - lose" scenario. The "losers" are not always gracious in accepting a negative outcome. The question of fairness always needs to be considered. The adversarial aspects of arbitration, both in process and outcome, can be equally as damaging to relationships as litigation.  By contrast, a collaborative "win - win" mediation approach can resolve a conflict, and leave the relationships strengthened and revitalized. 

We offer a Conflict Resolution Method Comparison chart on our FAQ page.  It provides a side by side, aspect by aspect comparison of Arbitration with the two other leading types of conflict resolution approaches, Mediation and Litigation.

For further information about how suitable arbitration might be for your particular situation please contact an experienced Conflict Consultant for a no cost, no obligation consultation.    We will help you find an approach to your conflict that works best for you. Send us a message with the 'Send Us Email' button below.

 

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