What is arbitration and what are the basic steps to it?

Arbitration is a method for solving legal disputes. It is a type of alternative dispute resolution (ADR).

Why use arbitration?

It’s used widely because it’s an alternative to filing a lawsuit and going to court to settle disputes. If parties can settle disputes outside of court, they can avoid costly court fees and also avoid having the matter settled by a judge. It also keeps matters private, which may be important to some parties. At any point during arbitration, a party may still decide to litigate matters, or go to court, instead.

Arbitration only occurs if both parties agree to select an impartial arbitrator. Customers typically and unknowingly agree to arbitration when they sign the fine print for a service agreement or contract. These service agreements state that customers will agree to arbitrate with the company if disagreements arise.

The Steps…

After both parties select an arbitrator or panel of arbitrators, the next few steps are similar to that of a court case, just simpler and quicker. Like a court case, evidence is shown, witnesses are presented, arguments are made, and remedies are discussed. Like a judge, an arbitrator will rule on the matter.

Downsides?

In many ways it can be a more cost-effective solution to resolve a dispute or disagreement than litigation, however, there are a few downsides. One such downside is that it can discourage customers from seeking to resolve matters that involve small amounts of money. While arbitration is less expensive than litigation, it still has a lot of costs involved. If a contract requires a dispute to be settled through an arbitrator, it would discourage customers from resolving small claims matters that could otherwise be settled in a small claims court.