What Is Arbitration?

What Is Arbitration?

What Is Arbitration?

Arbitration is a binding dispute- resolving mechanism that takes place outside of a courtroom. An arbitrator, who is a third party, is presented documents and oral arguments by both sides of the case, often represented by their own respective legal counsel. The arbitrator must then render a binding decision. Arbitration could be a potent and efficient tool for some litigants; while it could deprive one party of major benefits afforded litigants in a decision rendered by judge or jury.

Disadvantages Of Arbitration

As mentioned, arbitration is binding, meaning there is little room for an appeal even if an arbitration decision is wrong or unfair. Furthermore, the dispute is solved by a person or a small panel, and not a jury, leaving the decision in the hands of a small third party that can still become impartial.

10 Legal Terms You Need To Know ImageThe Discovery process, which is an important step for gathering information, is not as extensive as in litigation. While in litigation there are numerous documents exchanged, interrogations, and depositions of witnesses, arbitration tends to forego this step or severely limit it. Since an exchange of information is crucial for case building and coming to a fair solution, this will significantly affect the accumulation of facts and evidence for a case.

While arbitrators are required to follow the law and remain impartial, there are no specific guidelines for them to follow when making a “fair” decision. In many cases, the arbitrator reaches a decision based on equity and “apparent fairness,” and not on an exact following of the law.

Furthermore, the entire arbitration process is done behind closed doors, as opposed to a publicly available courtroom. This results in less accountability because when an arbitrator is not held publicly responsible, their decisions can become easily biased. This lack of transparency is exacerbated by a lack of court review of the decisions reached in arbitration.


Arbitration can help parties reach solutions a lot more quickly, privately, and with no court time, but it is not always the recommended course of action. It has its shortfalls; therefore, clients, along with the help of their attorneys, must make sure they do not unintentionally enter an agreement that requires binding arbitration that negatively affects them.

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