There are many reasons to avoid litigation. Litigation can be extremely expensive, time-consuming and can also ruin valuable business relationships.
This is why, in certain circumstances, parties experiencing conflict may choose to go with arbitration rather than litigation. According to the Superior Court of California, arbitration can be binding or non-binding and involves an arbitrator deciding the outcome of a particular case rather than a judge and jury.
What are the benefits of arbitration?
In the event that you and the other party wish to have your concerns heard by a neutral third party and have that third party make a decision, arbitration is a good choice. Generally, arbitration happens much faster and is less expensive than a full trial.
Another advantage of arbitration is that the parties can choose who the arbitrator or arbitrators are. This is a good solution for when you want somebody who has specific experience in the matter at hand to be in charge of making the final decision. It is common for parties to choose an arbitration panel of three people. The plaintiff chooses one arbitrator, the defendant chooses another and both compromise on the third.
What are the disadvantages?
If the arbitration process is non-binding, you may end up in court anyway if one party is unhappy with the decision. This can end up making the dispute more expensive holistically if the dispute ends up in court after a failed non-binding arbitration round. If the arbitration process is binding, it can be very difficult to undo an incorrect decision, even if there is ample evidence that the arbitration panel acted in error.