The operative question about arbitration is normally whether to include an arbitration provision in your business contracts or to sign a contract that includes arbitration. Whether you should arbitrate your company dispute depends on a variety of factors including the contract, the cost, and the purpose for which you desire to use arbitration.
What is arbitration exactly?
Arbitration is like a private trial out of court. There is no judge or jury. The person who decides is called the arbitrator. The parties choose the arbitrator. The rules in the arbitration are relaxed compared to a court of law.
Arbitration can be biding or non-binding. Binding arbitration means the parties are saddled with the decision and the arbitrator’s ruling is final. Non-binding arbitration means that the order the arbitrator makes at the end of the process is more of a suggestion that the parties can accept or reject. Non-binding arbitration can be ordered by a judge in a lawsuit as an alternative to or in addition to mediation. In the event the party that loses in the arbitration rejects the decision of the arbitrator and later loses at trial, then that party can be liable for attorneys fees in the case. But because many business contracts have attorney fee provisions in them that rule may have more bark than bite.
If the parties agree then there can be document discovery and depositions. But unlike a judge, the arbitrator lacks the power to compel either party to act. There can be intermediate hearings and those are usually by phone. Instead of a trial there is a final hearing in which the parties present their evidence through documents and testimony, but because the rules of evidence do not directly apply, either party can use evidence that they would never get into court.
Is arbitration better?
Whether arbitration or a court is better is a question that requires analysis with your business lawyer. Sometimes arbitration can cost more than court. Also, the lack of rules can inhibit the efficient, impartial, and fair adjudication of claims. Arbitration can also be slower than litigation, but arbitration is also private and the lack of rules can make it much easier to put on your case. So, arbitration is not necessarily bad and court is not necessarily better. It depends on the unique situation.
Before you can make an educated and informed decision about whether to sign a contract that requires arbitration, or to put that your business contracts, you should discuss that with you business lawyer.
Written by David Steinfeld
David Steinfeld is one of the few Board Certified business law experts in Florida. He has been licensed for almost 25 years. He is AV-Preeminent rated, ranked as one of the Best Lawyers in America by U.S. News and World Report, and consistently named a Florida Super Lawyer and one of Florida’s Legal Elite. Dave has also received Martindale’s prestigious Judicial Edition Award for high reviews by Judges, its Platinum Client Champion Award and has a 10.0-Superb rating on AVVO as well as a 10.0 rating on Justia, lawyer reviews websites.
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