Why do many people try to avoid arbitration of business disputes?

You have a disagreement with a former employee, your business partner or a vendor. Maybe it’s a dispute about the meaning or enforceability of part of the contract. You know that the contract is valid, but the other party just won’t compromise and help resolve the matter.

People often think that the only choice in this scenario is to go to court and to litigate the matter. However, arbitration has been a common form of alternative dispute resolution for businesses and individuals alike for many decades.

Despite its long history of helping people resolve issues outside of the courtroom, arbitration has a serious social stigma attached to it that may prevent people from pursuing it as an option. Why do so many people want to avoid arbitration?

Some businesses have damaged the social perception of arbitration

Big businesses long ago realized that mandatory arbitration was much cheaper and better for the public perception of their business than litigating every dispute with a vendor, client or employee. By forcing the resolution of disputes outside of court, companies can avoid negative publicity and court costs.

Companies that mandate arbitration don’t give their workers any other means of resolving a dispute. Even worse, these businesses directly hire the arbitrators involved, which could compromise the neutrality of the process.

When the arbitration is binding, that means that the decision reached by the arbitrator is the only possible resolution and there is no real option for an appeal. You also have very little control over the outcome. Essentially, it can be like court, except that the judge has the final say and you have no right to appeal their decision.

Should you still consider arbitration?

There are circumstances in which arbitration can be a viable form of dispute resolution. If both parties have a hard time sympathizing, arbitration can resolve the matter while still protecting their privacy.

If both parties want to negotiate some kind of settlement, non-binding arbitration could be an option that provides a starting point for negotiations. Others may find that mediation may be a better solution for a contract dispute, especially if they want to preserve the working relationship with the other party involved.

Thinking about what you stand to gain or lose an arbitration can help you decide if it is the best response to a dispute with another business.