To arbitrate or not to arbitrate – that is the question. In negotiations on contracts, one of the parties may seek to insert an arbitration clause. How does one evaluate whether to suggest such a clause on one’s own behalf? What does one make of it when the other party seeks to insert such a clause? There are a few basics to keep in mind. Arbitration can be a faster, more private, but probably more expensive means of resolving a dispute.
What is Arbitration? Arbitration is generally a private means of deciding disputes by a person or group of persons acting as an arbitrator. The arbitrator or arbitrators decide the matters submitted in arbitration and generally their decision is final. Arbitration is often viewed as an alternative to court proceedings and as a means of resolving legal disputes.
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Is Arbitration Faster than Litigation? In some jurisdictions in Virginia the courts are so backlogged that there is a substantial delay in getting matters heard and decided. In other jurisdictions there is not such a great delay. Currently, here in the Charlottesville area, there is a substantial backlog at the Charlottesville City Circuit Court, whereas in the Albemarle County Circuit Court, dates are much more readily available. Accordingly, an arbitration clause may have a benefit for contract disputes that would be before the City Circuit Court but not so much for such disputes that would be decided at the County Circuit Court.
Is Arbitration a Public Proceeding Like Court Proceedings? Unlike most court proceedings, arbitration is generally not a public forum. Parties pursuing their legal remedies in court usually file legal documents with the court which become matters of public record. Those documents can generally be viewed by members of the public. Arbitration is generally a private process where the documents are submitted directly to the arbitrator and the opposing party. Parties seeking to maintain some measure of privacy may see certain benefits in arbitration.
Is Arbitration Less Costly Than Going to Court? It depends. Arbitration usually involves an extra cost in the form of the arbitrator’s fee. There can also be additional administrative costs depending on the particular arbitration service used. If the parties engage in a similar amount of discovery, then it is certainly possible that arbitration can be even more expensive than litigation.
John B. Simpson, the author of this post, is a member of the Virginia Civil and Commercial Litigation section of MartinWren, P.C. John received his B.A. from Colgate University and his J.D. from the University of Hawaii’s William S. Richardson School of Law. He has been licensed to practice law since 1981 and is licensed to practice law in Hawaii and Virginia. Mr. Simpson emphasizes trial advocacy representation primarily in commercial and real property disputes.
For more information about arbitration and other forms of alternative dispute resolution, please contact John at (434) 817-3100 or by email at [email protected].
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