THE ADVANTAGES AND DISADVANTAGES OF ARBITRATION AS A MEANS OF SETTLING COMMERCIAL DISPUTES

Arbitration is a dispute resolution process in which the disputing parties present their case to a third party intermediary (or a panel of arbitrators) who examine all the evidence and then make a decision for the parties. This decision is usually binding. Like court-based adjudication, arbitration is adversarial. The presentations are made to prove one side right, the other wrong. Thus the parties assume they are working against each other, not cooperatively. Arbitration is generally not as formal as court adjudication, however, and the rules can be altered to some extent to meet the parties needs.

As in court-based adjudication, arbitration outcomes are typically win-lose, not win-win. Thus, the arbitrator usually decides that one side was right and the other wrong. They do not often go out of their way to develop new approaches for meeting the interests of both sides simultaneously, as a mediator would do, though if a win-win solution is apparent, the arbitrator would probably recommend it. Arbitration has several clear advantages First, it is more flexible. The disputants can usually choose their own arbitrator, who can be an expert in the topic in dispute, which a judge seldom is. This makes arbitration especially useful in complex, technical commercial disputes

The results of arbitration are achieved on a much shorter timeline and usually much quicker than litigation, especially since the result is binding and not open to appeal as litigation is, this helps a lot in settling disputes.

The proceedings are private so outsiders do not learn about the issues. This avoids the disclosure of trade secrets and potentially embarrassing information.

Costs are much lower with arbitration and this makes it one of the most convenient ways of settling disputes because of the affordability of the process. It makes all and sundry able to capable of settling disputes with arbitration.

Rules of evidence are less strict, making it easier to get to the truth 5. There is less emotion, making it easier for the parties to deal with each other going forward

The informal settling of a conference room instead of the courtroom may help preserve the business relationship and increases the level of confidentiality.

Where the investor has a choice between arbitration and a lawsuit, arbitration can have significant advantages. Simplified procedures, such as the lack of formal pleading rules, the absence of most pretrial motions, and simplified discovery can substantially reduce the cost of obtaining a decision

Most observers believe that the success of arbitration depends on its finality. The typical labor contract or submission agreement provides that arbitration decisions, called awards, are final and that they bind the parties. This is understood to mean that neither party has the right to

appeal the result to a court and that both parties understand that they are bound to the result whether they like it or not. In the labor arena, this quick resolution removes the threat of a strike and insures that production will continue. Arbitration also has disadvantages which also make it difficult in settling disputes and these are the following: The disadvantages of arbitration stem from the same characteristics. Arbitration is adversarial, thus it generally does nothing to create win-win solutions or improve relationships. Often it escalates a conflict; just as court-based adjudication is likely to do. In addition, arbitration takes decision making power away from the parties. This results in a resolution of the current conflict, but does nothing to help the parties learn how to resolve their own conflicts more effectively in the future, as does mediation. Other people also fault arbitration for being too informal and potentially unjust. Only the courts, with their carefully regulated procedures can provide justice, some observers believe. In arbitration, the arbitrators have no legal jurisdiction to bring into the arbitration preceding all parties to the dispute; therefore, it can be difficult to resolve the entire dispute There is no right to traditional discovery. Therefore, most discoveries are voluntary between the parties, and this usually does not work well.

The rule for the exchange of exhibits in advance of the arbitration hearing is also a source for problems. Customers must produce their exhibits and

witness list to the opposing side in advance, whereas rebuttal exhibits and rebuttal witnesses need not be identified in advance. Another disadvantage of arbitration in settling dispute is that neither party has the right to appeal the result to a court and that both parties understand that they are bound to the result whether they like it or not.