Arbitration and your business

When it comes to solving complex disputes, there are three primary roads to resolution. These include mediation, arbitration and litigation. For many small business owners, arbitration is a recommended course of action to avoid litigation. What is arbitration and when might it be right for your business? Keep reading to learn more.

What is Arbitration?

Arbitration is a form of dispute resolution. Handled by an independent third party, arbitration leads to the private, judicial determination of a dispute as an alternative to court action. Arbitration hearings involve the use of single arbitrators or an odd number of arbitrators, called a tribunal. Those involved in the dispute hand the case over to arbitrators while giving said arbitrators the right to decide the outcome.

The primary purpose of arbitration is to obtain a fair resolution without the costs or delays associated with traditional court proceedings.

Arbitration Classification

There are three arbitration classifications. They include commercial, consumer and labor.

Commercial Arbitration

Sesigned to settle disputes between two commercial enterprises or businesses. This is the most common form.

Consumer Arbitration

Settles disputes between the supplier of goods or services (generally a business) and a consumer.

Labor Arbitration

Refers to arbitration designed to settle employment-related disputes.

In arbitration...parties are able to select their own arbitrator

Arbitration Agreements

Arbitration agreements can be written into business contracts prior to doing business, or at the onset of a dispute. The two general categories include:

Prior Agreement. In business, agreements may state that if a dispute arises, it will be resolved through arbitration. This generally protects both parties from extensive legal proceedings and provides a pre-determined method for settling disputes. This is generally set up as an arbitration clause.

After the Dispute. Once a dispute has arisen, both parties may agree on arbitration to find resolution. This is generally referred to as a submission agreement.

Advantages of Using Arbitration

Arbitration comes with many advantages and is frequently written into business contracts as previously mentioned. Some of these advantages include:

Speed

Generally, arbitration takes less time and leads to a faster resolution than traditional court proceedings.

Confidentiality

In most cases, arbitration hearings are private and therefore not accessible to the public. When confidential business matters are at hand or in question, this is important.

Finality

In most cases, there is no right to appeal cases settled through arbitration. This means that, generally, outcomes are final.

Choice

When faced with court litigation, involved parties cannot choose their own judge. In arbitration, however, parties are able to select their own arbitrator or tribunal who may have expertise in certain areas.

Wondering whether arbitration may be right for a current dispute or to protect your business in the future? Speak with an experienced business law attorney, like Michael Hynum of Hynum Law today. Call us to set up a consultation to discuss your business’s needs.