What Is Arbitration and What Are Its Benefits?

This post is sponsored by Jay Young and the Nevada Business Law Blog

Arbitration is a legal process whereby two parties agree not to take their dispute to court. Instead, a third-party is chosen to hear both sides of the argument and then make a decision on the issue at hand.

It is mostly used in cases related to family disputes as well as business contracts: employer-employee agreements, business to business agreements, to name a few. What are the benefits of arbitration? And what happens when you arbitrate?

Unlike court cases, arbitration cases typically are faster and are informal. Informal means that the rules of evidence do not apply. Both parties only need to present their sides. The arbitrator will then make a decision based on the information presented to him. In a typical court case, both parties have to go back-and-forth presenting and refuting evidence.

In arbitration, the two parties can choose the arbitrator. This is different from court litigation whereby a judge is assigned to the court. The arbitrator has a lot of control on the proceedings. He is the judge and jury and his decision is final.

What Happens in Vegas, Stays in Vegas

When you hire an arbitrator in Las Vegas, you may be happy to know that arbitration proceedings do not become part of the public record. Because it is not a court case, what happens in arbitration stays in arbitration, which can be an advantage in many types of cases. This is very important especially for parties that prefer for the details of their case to be kept private. Also, aside from not being part of the public record, there is a lot of flexibility in arbitration. There are certain things that a judge cannot decide on, however, an arbitrator has greater leeway and can decide on many different things.

It is precisely because of the reasons stated above that most business contracts have a mandatory arbitration clause in them, which means that whenever a dispute comes up, the first recourse is arbitration.

But of course, arbitration is not without its drawbacks. Usually, if it involves employment contracts, the case typically moves in favor of the employer mainly because the contract favors employers to begin with. Also, there is no guarantee that an arbitrator is fair and unbiased. But perhaps the gravest disadvantage is the fact that once a decision has been made, it cannot be repealed, unlike a court case.

If you are a business, you will definitely want to talk with your lawyer about whether or not to include a mandatory arbitration clause. I stated that not going to court resolves a dispute quickly, however, sometimes this isn’t the case.

How is arbitration different from mediation? You may think they are the same but in mediation, the mediator helps both parties achieve an amicable resolution to their dispute. In an arbitration, both parties agree to let a third person decide who wins a case. It is actually the most simplified version of a typical court case.