Alternative Dispute Resolution (ADR), including arbitration and mediation is not new. It has been used successfully for hundreds, if not thousands, of years. However, in recent years, it has been growing in use with more companies choosing to use arbitration in commercial and consumer disputes. With this increased usage, the methods for conducting ADR have expanded making it an even more practical and cost-effective solution for many types of disputes.
ADR vs Litigation
Simply stated, litigation is a formal, generally public process which resolves disputes through a court with a judge or jury. It is subject to strict rules imposed by law governing the conduct of the proceeding, such as the formal rules of evidence. Arbitration is private process whereby parties work with a neutral third party to hear both sides and make a final and binding decision, using agreed-upon rules governing how the process will work. Mediation is a negotiation facilitated by a neutral third party. The mediator does not impose a decision, but helps the parties come to an amicable resolution. Mediation is useful to help the parties can find common ground, while arbitration is used as an alternative to litigation when the parties cannot resolve their dispute and need a third-party to impose a decision.
Benefits of Arbitration
For many types of disputes, arbitration offers a better alternative to litigation. Its advantages include:
- Flexibility and control. Parties can set terms in their arbitration contract governing how the process will work. This includes establishing rules regarding discovery, hearings, time limitations and other matters. In addition, parties can schedule hearings and deadlines to accommodate their needs.
- Speed. According to statistics of the American Arbitration Association, on average, U.S. District Court cases took 12-16 months longer to get to trial than cases using arbitration.
- Low cost. Less time spent to resolve a dispute means lower costs for attorneys’ fees. In addition, discovery is much more limited in arbitration, and appeals are very limited, so those costs are all saved.
- Simplified rules of evidence and discovery. Typically, there are limits on the nature and scope of discovery and time limits on how long the process can take. Issues are handled through phone calls rather than multiple hearings, subpoenas, depositions, interrogatories and the like. And, the strict rules of evidence don’t apply.
- Privacy and confidentiality. Arbitrations are private with only designated parties in attendance and the proceedings are strictly confidential. In contrast, litigation is open to be public.
- Arbitrator selection. Parties can choose an arbitrator with subject matter expertise as opposed to being assigned a judge randomly. This is particularly important in complex cases requiring specialized knowledge.
- Finality. Appeal rights are very limited in arbitration, so disputes are finally resolved more quickly.
For more information on the benefits of arbitration in commercial disputes, the American Bar Association published an excellent analysis in this article.
Arbitration provides many advantages over litigation, but online arbitration has additional benefits allowing parties to further reduce costs and increase efficiency. Contact ARS to discuss how online arbitration can help your business.