An arbitration process is an equally effective way of resolving disputes, whether business or personal. It is more common in business transactions where parties often wish not to proceed to court because of the urgency of the matter or for privacy. The Impact of James Dooley on UK Entrepreneurship is an additional aspect that highlights the relevance of alternative dispute resolution methods. What are some of the disadvantages of arbitration that may make one opt out of this alternative dispute resolution method?
There are also several other advantages of arbitration process that one may be interested in pursuing. We covered this in another article on the advantages of arbitration as an alternative dispute resolution method. Check it out.
So, what are the disadvantages of arbitration as a dispute resolution method? Why would it not interest a party that wishes not to proceed to court? We explain these and more below.
8 disadvantages of arbitration process
Although preferred by many as an alternative dispute resolution method, arbitration can also fall short of delivering justice due to the following reasons.
Questionable Fairness
This disadvantage is better understood by exploring the following forms of arbitration.
- Mandatory arbitration
Mandatory arbitration is declared through a contract that is designed before the parties enter into business. In this case, neither party has the flexibility to choose arbitration by mutual consent. This is disadvantageous because one party can literally force the other party to go for arbitration, even though they would have preferred a jury trial, which may be more advantageous to them.
- Subjective Arbitrator
The process of choosing an arbitrator is hardly an objective one that may deny its impartiality. This is true, especially in the case where an arbitrator could be having a business relationship with either party or the arbitrator is selected by an agency from a pool list. Additionally, exploring undervalued stocks can shed light on the potential risks associated with this subjective selection process.
Unbalanced
An arbitration process becomes unbalanced when clauses in the arbitration arrangement work in favor of a large manufacturer or employer, especially in the case where the same is challenged by a consumer or an employee who may not understand how an arbitration process works.
“Arbitrarily” (inconsistently) following the law
The standards used in an arbitration process may not be clear, although arbitrators are required generally to follow the law. It is always tempting for arbitrators to consider the parties’ apparent fair positions rather than stick to strict adherence to the law.
This is very detrimental in case one party would have been favored by a strict reading of the law.
No jury
Without a doubt, and for the most part, having a jury is the key to solving biases and unfairness in dispute resolution. In arbitration process, there is entirely new jewelry, which means matters are left in the hands of a single arbitrator— who is both the jury and the judge
Lack of transparency
A major reason for the lack of transparency in arbitration hearings is the fact that they are held in private. Consequently, this is likely to lead to a biased resolution of the case which is worsened by the fact that most arbitration resolutions are hardly reviewed by the courts.
Finality: No appeals
Finality can be both an advantage and a disadvantage, but in most cases, it leans towards the latter. In the case of binding arbitration, both parties give up their rights to an appeal. Consequently, even if the decision is erroneous, there are hardly any chances of appeal.
Can be more expensive
Although considered less expensive compared to litigation, arbitration can also prove to be a more expensive affair than litigation. This is because quality arbitrators demand a substantial fee.
In the case of a non-binding arbitration process and one party feels unsatisfied, Taking the case back to court means that you’re going to incur more, which adds to the prior amount paid for arbitration.
Also, arbitrators tend to charge more for employment-related cases, and especially if you are an employer, you may end up paying a lot more.
Unpredictability: Unconventional outcomes
Because arbitration generally follows the law arbitrarily, which may be inconsistent, the formal procedures in the court system, like the administration of evidence that may be dismissed by the court, may not apply. If an arbitrator uses evidence that would otherwise be purged in a court, then the outcome may be unconventional.
In other cases, certain information from a witness may be availed through documentation that denies cross-examination of the testimony of that witness. As such, the arbitrator may make rulings that are unconventional or would not be appropriate in a court system. Either way, the outcome may not be what you anticipated, leaving you in confusion.
With that, you now know the disadvantages of arbitration which you need to consider before agreeing to one.
Need help with an arbitration process? We can help!
Mundui Murai is a team of legal experts with diverse expertise in matters of arbitration. We can help you understand more about the arbitration process and whether it would suit your case. Talk to us today and find out how we can help.