More Pros and Cons of Arbitration

I have written before about my view that arbitration is not necessarily preferable to litigation, and that, in my experience, litigation can be the better forum for resolving disputes. I know this runs contrary to the usual platitudinous bon mots frequently tossed off about the wonders of arbitration, but hard earned experience tends to discredit flowery sentiments of that ilk. As I discussed here and here, I am skeptical that arbitration is the better dispute resolution method for many cases or is in the best interest of all parties to a contract, including an insurance contract.

It turns out that many sophisticated commercial actors hold the same thought, and don't freely give up the courtroom, with all of its attendant protections (many of which are absent from arbitrations), as the forum for resolving their commercial disputes. Two law professors have analyzed this question statistically, and document this fact here, in this newly published scholarship. To the extent that there is such a thing as the wisdom of the crowd, this article seems to show that my gut sense about arbitrations, borne out of years of resolving disputes in a variety of forums, is on the money.

Written By:Marty Jones On December 14, 2006 10:20 PM

My experience with arbitration shows that it is no less expensive than litigation, and no more "final" in the sense it often leads to appeals that are at least facially valid. Most arbitrators do not understand the basics of arbitration procedure, which leads to bad results even in the simplest of cases. I think transactional lawyers who write arbitration clauses into commercial contracts need to be sure the clients have sufficient warning of the pitfalls. Arbitration is more pandemic than panacea.

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