Arbitration, is it Really Better?
Arbitration, an alternative to litigation, has been around for a long time. In fact, George Washington had an arbitration clause in his will. Arbitration is often touted as a widely recognized alternative to traditional litigation, offering parties a more efficient and cost-effective means of resolving disputes. But is it really?
What is Arbitration?
Arbitration is a private dispute resolution process where parties agree to submit their disagreements to a neutral third party, known as an arbitrator, rather than pursuing litigation in court. The arbitrator reviews the evidence and arguments presented by both sides and issues a decision, which can be either binding or non-binding, depending on the terms of the arbitration agreement. Binding arbitration results in a final and enforceable decision, while non-binding arbitration serves as an advisory opinion that may facilitate settlement.
In other words, it is a less formal kind of litigation where the parties appear before an arbitrator (usually an attorney) and that arbitrator comes to a conclusion with regard to the dispute.
The Role of Arbitration Agreements
Arbitration is a matter of contract, meaning that parties cannot be compelled to arbitrate unless they have agreed to do so. In Nebraska, arbitration clauses are commonly included in commercial contracts, employment agreements, and other legal documents. These clauses typically specify that any disputes arising under the contract will be resolved through arbitration rather than litigation. Courts in Nebraska generally uphold the enforceability of arbitration agreements, provided they meet the legal requirements for validity and do not violate public policy.
Advantages of Arbitration
Arbitration is often billed out to offer several benefits compared to traditional court proceedings. Those benefits are usually described as:
Efficiency: Arbitration is often faster than litigation, as it avoids the lengthy procedural requirements of the court system.
Cost-Effectiveness: By streamlining the dispute resolution process, arbitration can reduce legal fees and other associated costs.
Flexibility: Parties have greater control over the arbitration process, including the selection of the arbitrator and the scheduling of hearings.
Confidentiality: Unlike court proceedings, which are typically public, arbitration is a private process, allowing parties to maintain confidentiality.
But, here is the catch. Arbitration is actually very expensive. In fact, many large companies use arbitration clauses to prevent themselves from being sued because they know that the typical consumer cannot afford the arbitrator’s fees. Arbitrators charge $300, $400, and $500 an hour! Moreover, there are large upfront costs associated with opening an arbitration case. So what is the real difference between arbitration and traditional litigation? In arbitration, you have to pay for the judge and rent his courtroom. In litigation, you don’t. Moreover, arbitration is not suitable for all cases. For example, disputes involving constitutional questions or novel legal issues may require judicial adjudication.
The Bottom Line:
Arbitration is designed to be an efficient and cost effective means of resolving legal disputes. In some cases, it does work well, but in many it is just as expensive as traditional litigation. Consumers and parties to a contract should be very careful when entering into agreements that require the resolution of disputes through arbitration alone because the cost of arbitration may prohibit them from attempting to resolve their legal issue at all.
