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What Is Arbitration?

We talked recently about the alternative dispute resolution (ADR) method of mediation. Another form of ADR is arbitration and it differs from mediation in several ways.

A fundamental purpose of ADR methods is providing flexibility to stakeholders in a disagreement. Mediation is more flexible than arbitration and arbitration contains more flexibility than a legal setting — but not by much.

Like mediation, arbitration works to resolve differences outside of a courtroom, reducing time, costs and the bitterness associated with a lengthy legal battle. Here are some points to consider about arbitration:

  • While mediation is voluntary, arbitration usually arises as a result of an arbitration clause in many kinds of contracts. If you have not already, be sure to read the fine print of your automobile insurance or even your car purchase agreement. Many businesses include mandatory arbitration as the agreed-upon means of dispute resolution when you sign on the bottom line.
  • During arbitration, parties present their evidence and argument to an arbitrator or a panel of arbitrators. Arbitrators are chosen by both parties, but objectivity can be an issue of concern depending upon the pool of arbitrators available, their experience and their work history.
  • Arbitration is a less expensive than a court proceeding, but costs of initiating the arbitration and paying arbitrators is rising. Good legal counsel is important when approaching an arbitration setting.
  • Unlike court, arbitration is private but the lack of transparency of a courtroom setting can be a disadvantage if arbitration turns out poorly.
  • If you cannot come to agreement in mediation, the matter may proceed to court. The decision of an arbitrator is usually final and in agreeing to the arbitration clause, you usually give up your right to appeal the decision of the arbitrator.

You may already have agreed to arbitration without knowing it. If choosing arbitration, talk to The Reddy Law Firm, PC for experienced advice when moving forward.

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