Exploring Arbitration: Get to Know Common Cases

Arbitration is a form of alternative dispute resolution (ADR) used to resolve legal conflicts outside of traditional court proceedings. It involves the submission of a dispute to one or more impartial third parties known as arbitrators or a panel of arbitrators. The parties involved in the dispute agree to abide by the arbitrators’ decision, which is legally binding and enforceable in a similar manner to a court judgment.

Arbitration is often chosen as an alternative to litigation for various reasons, including its potential to be more efficient, confidential, and cost-effective. It is commonly used in both domestic and international settings, encompassing a wide range of disputes, such as commercial disputes, labor and employment matters, construction disagreements, consumer disputes, and more. It is designed to reach a favorable outcome without the expense and time of a trial at the State or Federal Court levels. However, it is still an adversarial proceeding conducted much like a trial, with each side presenting their cases and challenging the veracity and legal merits of the opponent’s case. Let’s look at the most common types of arbitration cases.

Most Common Types of Arbitration Cases

According to the Financial Industry Regulatory Authority (FINRA), the most common types of disputes that are settled by arbitration are as follows:

• Breach of fiduciary duty;
• Failure to supervise;
• Negligence;
• Misrepresentation;
• Breach of contract;
• Suitability;
• Omission of facts;
• Fraud; and
• Unauthorized trading.

An arbitration is less formal than litigation and more formal than mediation. No binding decision can be made by a mediator, which is not the case for an arbitrator. Similar to a court trial, arbitration works by two parties entering an agreement for a neutral third-party arbitrator (similar to a judge) to hear both sides of the argument and make a decision afterwards. Both parties must comply with the decision that the third party makes. One of the main advantages to arbitration over litigation is efficiency. It is faster, less expensive, and there is more flexibility of terms and rules. Both parties are encouraged to work together, making arbitrations less hostile than the typical litigation.

Unlike litigation, which involves courts with crowded schedules, arbitration dates can be made to accommodate both parties in a timely manner. Privacy is another major benefit of an arbitration over litigation. Both parties can agree to keep the final decision that is made completely confidential. This goes a long way in decreasing embarrassment or the revealing of important information that a company may want to be kept secret. Arbitrators are more able to make decisions freely, as they are not bound to state and federal legal precedents and also do not have to rationalize their decisions to either of the two parties. However, when choosing an arbitrator it is important to pick a firm that has a storied history of fair, intelligent,  and careful decision making with high regard for the laws regarding the business operations in question. Decisions, termed an “award,” made by an arbitrator are almost always seen as binding agreements and will be upheld by a court of law. However, there are certain circumstances in which an arbitrator’s award may be overturned in a court of law.

These are very unlikely circumstances, which include the following:

• The award was a result of corruption, such as fraud;
• The arbitrator was not a neutral party (they were heavily biased) or they were corrupt;
• The arbitrator was guilty of misconduct by refusing to postpone the hearing due to important new evidence, or they showed misbehavior or prejudice against either of the parties; and
• The arbitrator made a decision beyond their powers or failed at their duty and did not make a definite, final award.

Overall, arbitration offers an efficient and alternative method for resolving legal conflicts, providing parties with more control over the process and potentially reducing the time and costs associated with traditional court litigation.