Arbitration is the process of bringing a business dispute before a neutral third party in order to resolve the situation.
Arbitration is a form of alternative dispute resolution (ADR), used in place of litigation in the hope of settling a dispute without the time and expense of going to court.
The process begins when two parties agree to settle their dispute through arbitration. The decision may also have been made for them by the addition of an arbitration clause to a contract that both parties have signed. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes (usually) that decision is binding on the parties. It is worth noting that there is generally no appeals process, unlike in court proceedings.
There are various benefits to settling a dispute through the use of arbitration. The speed and informality of the arbitration process are major reasons why many businesses select arbitration over litigation. In many cases, arbitration can be a shorter process, and if no lawyers are needed, it can be less costly.
The two parties to the arbitration can also have control over the selection of the arbitrator. This differs to a court case where the judge and jury selection is out of the hands of the two parties. Finally, arbitration hearings are private and the results are not on public record. This can save face for both parties who may not want to publicise their dispute.
More businesses are including arbitration clauses in their agreements and contracts as a way to quickly and quietly resolve disputes. These clauses can help to protect businesses from expensive court cases while still giving customers and third parties an avenue to resolve disputes.
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