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Should you consider arbitrating your business dispute?

You may have heard about arbitration, but you may not know much about it. Under the right circumstances, it can be a quick, economical and final way to resolve a business dispute.

You can arbitrate any type of business dispute with agreement from the other party. Some contracts have clauses specifying that arbitration will be used as the method to resolve any and all disputes. If you are involved in a contract dispute, you should check to see if your contract contains such a clause.

What is arbitration?

Arbitration is a hearing before one or more neutral persons called arbitrators. It is much like a courtroom trial except that it is less formal, including having less-formal rules of evidence. The parties agree on the arbitrator or arbitrators. Often, a preliminary hearing is required. Then, at the arbitration hearing, each side presents its case and challenges the other side’s case.

There are many potential advantages to arbitration. For one, it usually takes less time than courtroom litigation. Especially when the amount in question is less than $75,000, hearings can generally be expedited. Scheduling is easier, hearings may be shorter than trials, and the arbitrator’s decision generally comes within weeks or months.

Arbitration is confidential. If you take your case to trial, the dispute becomes part of the public record. This could mean your private, proprietary information is at stake. In arbitration, only the award itself is made public, not the details of the dispute. Moreover, you and the other party can come to an agreement on what types of evidence will be heard and how to keep it private.

Arbitration is generally final. If you take your dispute to court, it is possible that the other side will appeal. Protracted appeals could mean months or even years go by before your litigation is final and the dispute is resolved. In “binding arbitration,” the most common type, both parties agree to accept the arbitrator’s decision as final.

How do you get started?

As you discuss your business dispute with your attorney, ask if arbitration is required by your contract or is an option in your case. Often, your attorney can achieve an agreement to arbitrate if arbitration is not required by your contract.

Once you have an agreement to arbitrate, you and your attorney will file a claim with an arbitration service or individual arbitrator. You will serve your claim on the other party and move forward with scheduling a preliminary hearing.

Arbitration is not right for everyone or every dispute. Talk to your business lawyer about the pros and cons in your particular case.