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Arbitration is a formal non-judicial process similar to litigation in the courts that can be binding or non-binding depending upon the agreement of the parties. However, the hearing is in private in front of a nominated neutral third party, the arbitrator, instead of a judge and jury in open court. The arbitrator makes a decision based upon the evidence and argument presented by the parties.

Advantages of arbitration:

  • The parties choose who their arbitrator or select a panel of several arbitrators. This ability to choose the decision maker allows the dispute to be heard by a qualified person with the particular subject matter expertise involved in the dispute
  • The arbitral process is private and confidential to the parties and the arbitrator.
  • The parties, with the consent of the arbitrator, control the time and place of arbitration.
  • Arbitration offers much more flexibility than the judicial system. Procedures and processes can be customized and tailored to a particular dispute to ensure the efficient administration of justice.
  • An arbitrator’s award can be confirmed in court so that it will have the same effect as a judgment obtained in court.

Disadvantages of arbitration:

  • Arbitration can be costly depending on the length of the hearing, involvement of arbitrators in pre-hearing disputes, and the number of arbitrators.
  • It is possible, but difficult, to appeal an arbitrator's decision. On the one hand, you give up valuable appellate rights you would have in court. On the other hand, the possibility of appeal may also delay finality, particularly if the dispute relates to an important point of law.
  • Access to “discovery” and subpoena power is generally much more limited than in a lawsuit filed in court.

Arbitration is the preferred final method for resolving commercial disputes if:

  1. The parties desire privacy and confidentiality.
  2. The nature of the dispute involves specialized subject matter.
  3. One or both parties desire swift resolution of the dispute.

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