Why do people choose to arbitrate their disputes?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Arbitration is a private and confidential way for people and businesses to solve disputes. An arbitrator is selected by the parties and hired similar to hiring any other expert for a company. The arbitration happens in a private office building and is not recorded for the public record. Instead, an arbitrator hears the case and makes a decision. The decision is then drafted into a private contract for the parties to sign and abide by.

Arbitration is generally cheaper, faster, and more informal than litigation. According to the National Arbitration Forum, the average court case takes between 650 to 720 days to reach a resolution. An arbitration has an average solution time of 104 days from start to finish. Additionally, the cost is drastically less. Just the initial filing for federal court costs $400. This does not include copy fees, transcription fees, payment of experts, or even the response filing fee for the other side. On average a typical civil case is court will cost a plaintiff $130,112,080. The average cost of an arbitration from start to finish is $870.

Unlike litigation, the parties have far greater control in terms of choosing their arbitrator and to determine when, where, and how the matter will be decided. Unlike formal court, parties can review the arbitrator’s credentials, request contact information for recommendations, and even interview the arbitrator. Arbitrators will typically be either an experienced attorney or even a retired judge. Once the dates are set, there is far less worry about being bumped by another case or taken off the calendar.

Arbitration has proven so effective that many courts now offer binding arbitration proceedings as an alternative to a formal court date. Once the arbitration is complete, the arbitrator’s decision is simply approved by the judge and filed as the final judgment in the case.

The parties also may agree to the specific rules under which the case will be heard and the types of evidence that will be accepted. For example, the parties can agree in their arbitration provision to allow in evidence that might not be admissible in a court without having to incur extraordinary expense. The parties also may agree on how the arbitrator should go about determining or allocating damages, expenses, attorney fees, and arbitration costs.

In binding arbitration cases, the decision is also “final.” Once a decision has been rendered, there is no traditional appeal. An arbitrator’s Award and Opinion can only be set aside or “vacated” for very specific statutory reasons such as the arbitrator making an obvious mistake or both parties contractually agreeing to disregard the arbitrator’s decision.

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