Arbitration Is Better For Business
People or firms engaged in any kind of business in America today need to know something about the system of the resolution of disputes. Prior to entering into any agreement, it is wise to anticipate how disputes will be resolved. The resolution of disputes is very expensive, time consuming and frustrating. But proper planning will help reduce the financial risk, position the business better to favorably resolve the argument and lessen the financial exposure. Understanding the general outlines of argument resolution will better prepare the business to direct its counsel.
Resolution of Business Disputes
Business disputes are resolved today, by:
(1) voluntary negotiation and settlement or work-out;
(2) court litigation in either State or Federal Courts;
(3) Mediation, or
All agreements should clearly specify the method of argument resolution. If the parties wish only to litigate the argument in court, the agreement should specify the “venue” or location of the courts, designate which State’s law will govern the agreement and provide for how attorneys fees and costs will be assessed between the parties. Usually, all courts today will refer disputing parties to Mediation before a trained and licensed Mediator. That person will not have the right to adjudicate or decide the argument, but will help the parties (and their lawyers) settle the argument. If the matter is not settled, the case will be presented to the Court and perhaps a Jury. The average time in America today for the adjudication of a argument by litigation is between 13 to 20 months. After adjudication, a litigant typically has a right to at the minimum one popularity, which could take another year. Appeals are typically decided on purely legal and not factual issues.
Arbitration is a good different to court litigation
Arbitration is a procedure stated by the parties in their agreement. A typical arbitration clause will be inserted into the contract, after negotiation. One shared form of clause is as follows:
“Any argument or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by [ insert the name of the arbitration administrator, such as the American Arbitration Association] in accordance with its Commercial [or other] Arbitration Rules. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.”
By virtue of the above clause inserted in the agreement, the parties not only vest the resolution of the argument with arbitrators, but they also agree that the Award of the Arbitrators may be enforced by a court, if the losing party does not honor the award. All State courts and Federal courts will enforce proper arbitration awards.
Weigh the Benefits of Arbitration
By agreeing in writing that disputes will be resolved by arbitration, the parties do some very important things:
(a) They make clear that all disputes are arbitrable. consequently, delay tactics, such as those used to stretch out payment obligations, are reduced.
(b) By inserting the name of the arbitration organization which will supervise the arbitration, the parties automatically incorporate a complete set of rules of informal procedure, used commonly to resolve similar disputes. The American Arbitration Association, for example, has very clear rules, prepared after hundreds of thousands of proceedings.
(c) The location of the argument resolution proceeding is agreed upon.
(d) The matter will be decided by experienced arbitrators, chosen by the parties, who have skill in the general area of the business. For example, in a construction argument, the parties would specify the use of Construction Arbitration Rules, and select arbitrators who have experience in construction disputes. The same is true for Maritime Disputes, Commercial matters, Employment disputes, Labor disputes, etc.
(e) The arbitrators are experienced, vetted adjudicators. They will take the time to hear the evidence and decide the argument in a more informal procedure than court litigation. The parties can agree on one or three arbitrators to decide the argument. clearly, a three arbitrator panel will cost more and include more time in procedure.
(f) Discovery procedures are very limited, saving the parties substantial time and expense.
(g) The parties can agree, by separate clause, that the costs and attorneys fees will be assessed by the arbitrators against the losing party. Not only does this add assistance, but it acts to encourage settlement discussions at an early time.
(h) The arbitration hearings tend to be much more informal than court proceedings; the arbitrators are not bound by formal rules of evidence, nor the rules of procedure utilized and required by law.
(i) Arbitrators decide and do not settle or mediate disputes. Their function is simply to hear the evidence, the views of the parties and make a final and binding decision.
Comparisons to Court Litigation
Court litigation involves specific Rules of Evidence and Procedure, following a body of Statutory and case law precedent. additionally, a complicate Discovery course of action involves time and substantial expense. However, judged decisions are unprotected to popularity. Arbitration awards are more or less final and conclusive without the right to popularity, except in very uncommon circumstances. consequently, a person agreeing to or insisting on arbitration as a argument resolution procedure must understand the financial trade-off. Once the contract is signed, a party has no different if an arbitration clause has been inserted. In almost all circumstances, the party is forced to arbitrate-already if he or she changes views on the argument resolution benefits. Courts enforce arbitration clauses just as they would enforce contracts.
Careful Planning Makes Better Contracts
Parties negotiating a contract need to decide what is better for them. Business disputes are much better appropriate to arbitration than personal or consumer disputes. Parties need to weigh their legal position and consider what they are giving up for the informality, reduced cost, speed, skill and finality of arbitration. Parties need to carefully draft the contract clauses and cover their expectations. They need to think beyond the business terms of the contract and consider various scenarios of enforcement of the contract. Like all negotiations, economic benefits and risks must be evaluated, usually with the assistance of a competent lawyer.