The process of arbitration is a form of Alternative Dispute Resolution (ADR) involving the appointment of an arbitrator, who acts as a neutral third party to resolve disputes outside the ordinary court system.
When it comes to small businesses, arbitration has its own set of advantages that make it favorable when it comes to resolving conflicts.
This is an extensive guide on why small businesses should consider arbitration.
Cost Effective
Lower Legal Fees
1. Streamlined Process: Generally speaking, the arbitration process is more streamlined than litigation with fewer motions and legal maneuvers that require substantial attorney time.
2. Limited Discovery: Arbitration involves limited discovery thus reducing the time and cost associated with collecting and producing evidence.
3. Fewer Hearings: Usually, arbitration will have fewer hearings compared to litigated cases leading to fewer billable hours for attorneys.
Reduced Court Costs
1. No Court Fees: Many court-related fees such as filing fees, motion fees, and court reporter fees are eliminated if a case goes through arbitration instead of litigation.
2. Lower Administrative Costs: There are generally fewer administrative costs in comparison with the traditional court system because arbitration is less formal.
Time-Efficient
Faster Resolution
1. Shorter Timelines: In arbitration, deadlines are often shorter and thus this speeds up the process. Arbitration can solve cases that could take years in court in a few months. For more information on this, read this guide on arbitration.
2. No Backlogs: While courts may have long delays due to piled cases, arbitration takes place when it is necessary.
Flexibility in Scheduling
1. Convenient Scheduling: As opposed to court dates which have fixed schedules, arbitration hearings can be scheduled at the convenience of all parties involved.
2. Quick Hearings: This is helpful for small businesses that need expedited problem-solving through rapid arrangement of hearings in arbitration.
Confidentiality
Private Proceedings
1. Non-Public Hearings: Arbitration hearings are not open for public scrutiny like court proceedings which means that no part of the conflict will be made known to an outsider.
2. Protected Trade Secrets: The business’s confidential information like trade secrets or proprietary business processes remains safe, preserving its competitive advantage.
Sealed Records
1. Confidential Documents: The documents and records related to the arbitration process are often sealed from the public, enhancing confidentiality and privacy.
2. Non-Disclosure Agreements: Parties may agree to non-disclosure clauses in arbitration to keep confidentiality.
Expertise of Arbitrators
Choice of Arbitrator
1. Specialized Knowledge: The parties may decide on an arbitrator who is familiar with their industry or the dispute at hand hence, enabling a more informed decision-making process.
2. Mutual Agreement: Both parties usually consent to the arbitrator and this can increase confidence in whether the process is fair.
Informed Decisions
1. Industry Experience: An arbitrator who has worked in similar industries can better understand the technicalities and nuances behind disputes, leading to more appropriate resolutions being made.
2. Tailored Outcomes: Decisions from seasoned arbitrators are more likely to be tailored toward addressing specific facts surrounding individual disputes.
Flexibility and Control
Customizable Process
1. Tailored Rules: Parties may agree on rules and procedures which they deem fit for arbitration therefore making it a flexible process that can suit their needs.
2. Adaptive Schedules: This allows the arbitration process to change depending on when the parties are available or not disrupting business operations as much.
Control Over Outcomes
1. Arbitrator Selection: The parties can choose their arbitrator, giving them more power to decide who will hear their case.
2. Location Flexibility: Arbitration may be held in a place that is convenient for the parties thereby cutting travel and logistical expenses.
Enforceability
Binding Decisions
1. Finality: Arbitration awards are binding and enforceable just as court judgments do, thus providing definite solutions. According to the Chartered Institute of Arbitrators (CIArb), arbitration awards in the UK are recognized and enforceable under the Arbitration Act 1996.
2. Reduced Appeals: There is very limited scope to challenge an arbitration award. This means that conflicts are put to bed once and for all.
International Recognition
1. New York Convention: Businesses with international operations find the New York Convention beneficial since arbitration awards are accepted across many nations globally.
2. Cross-Border Enforcement: In traditional litigation, this can often be more complicated and uncertain than through arbitration mechanisms that can be used to enforce rulings across borders.
Preserving Business Relationships
Less Adversarial
1. Collaborative Approach: In general, the arbitration process tends to be more collaborative rather than adversarial as in litigation before courts; thus it assists in maintaining good professional ties.
2. Mediation and Settlement: In several arbitration processes it is required that mediation and settlement have to be encouraged first before the final decision is made, which promotes friendly solutions.
Focus on Settlement
1. Early Resolution: Early resolution by arbitrators involves facilitating settlement talks and can result in faster and mutually acceptable outcomes.
2. Relationship Maintenance: Arbitration keeps business relationships intact and if anything makes them even stronger since it avoids hostile public court battles.
Reduced Formality
Simplified Procedures:
1. Informal Hearings: The process of arbitration hearings is less formal than trials in courts; this can make small business owners feel more comfortable about the process or less threatened.
2. Fewer Procedural Rules: Generally, procedural rules for arbitration are relaxed leading to a quicker process with fewer legal complexities involved.
Less Formal Environment
1. Comfortable Setting: Rather than a courtroom, the hearing can occur at any convenient place where it feels neutral and relaxed.
2. Stress Reduction: For business owners and employees grappling with disputes, an informal structure of an arbitration process reduces stress considerably.
Conclusion
Arbitration is a better path in handling cases for small business enterprises. Its cost-effectiveness, time efficiency, confidentiality, expert arbitrators, flexibility, enforceability, the potential to save business relationships, and minimized formalities make it an interesting option. Small businesses can resolve conflicts in ways that are least disruptive to their operations; keep valuable relationships intact and protect their interests by choosing arbitration as a means of addressing disputes.
