In recent years, arbitration has grown in popularity as a mechanism for resolving disputes, but it remains misunderstood in several key respects. In this blog post, we try to dispel some of the most common myths about arbitration.
1. Arbitration is only for large, high-value disputes
Almost any type of dispute can be submitted to arbitration – it comes down to an assessment by the parties or their counsel as to whether arbitration is desirable in the context of the nature of the particular dispute and the parties’ needs and priorities. Even relatively low-value commercial contracts can contain arbitration clauses. Where a dispute is on the lower end of the value spectrum, the arbitration can accommodate that: for example, it may be that the parties will benefit from more streamlined procedures and a less senior decision-maker. There is a growing pool of arbitrators who are less senior than the retired judges and senior law firm partners that many think of as commercial arbitrators, but are still well qualified and trained to resolve disputes effectively and efficiently, and at a lower fee (myself included – excuse the shameless plug!).
2. Arbitration is more expensive
Many believe that, because arbitrators are paid while judges are not, arbitration is more expensive than resolving a dispute through the court process. However, arbitration offers a number of efficiencies that can save costs elsewhere, such as streamlined procedures, built-in case management, and an overall shorter timeline for resolution of the dispute. A quicker and more efficient process can mean lower legal fees, lower opportunity cost, and lower cost overall.
3. Arbitration is only available where the contract provides for it
Many contracts contain arbitration clauses or dispute resolution clauses that provide for arbitration in the event of a dispute – but this is not the only way to gain access to arbitration as a dispute resolution mechanism. In the absence of a pre-existing arbitration clause, parties are still open to agree to submit their dispute to arbitration, either at the time the dispute arises or any time in the course of the dispute.
4. Arbitration is mutually exclusive from court proceedings
The same dispute cannot be submitted both to arbitration and to court, but this does not mean arbitration and court proceedings are mutually exclusive. In fact, they can work together to assist parties in resolving their disputes as efficiently as possible. Current court timelines can have parties waiting months for motion dates or case conferences, with many cases taking years to get to trial. Some arbitrators have begun offering case management arbitration, whereby parties to court proceedings can appoint an arbitrator for the limited purpose of assisting with interim procedural matters, such as case management and motions, while keeping the ultimate substance of their dispute within the jurisdiction of the courts. Such a hybrid process can assist parties in moving toward trial – or the ultimate resolution of their dispute on the merits – as efficiently as possible.