Jan 28, 2025
The Pros And Cons Of Arbitrating Disputes: What To Know Before Arbitration

Arbitration is one of the tools of what is commonly referred to as “Alternative Dispute Resolution” (ADR). ADR is the process for resolving disputes by a neutral third party in a setting other than the County Courthouse before a Judge. For a lawyer representing clients, there are two critical decisions that need to be made early in the case: The first is whether arbitration is optional, whether to choose arbitration or not. The second is, where arbitration is required, choosing the right arbitrator.
This article talks about the two most common forms of arbitration:
- Arbitration required by contract
- Court-ordered arbitration.
Contractual Arbitration. In today’s fast-paced and litigious world, resolving disputes efficiently and cost-effectively has become a priority for businesses, individuals, and organizations alike. The process tends to be more informal than courtroom proceedings. With fewer procedural rules, arbitrations can provide a faster and less expensive resolution (but not always!). This makes arbitration an attractive option for many businesses and individuals seeking an alternative to costly and time-consuming trials.
It is important to understand arbitration because businesses now commonly write arbitration clauses into their contracts and sales agreements, which require that as a condition of the sale, the other party agrees to binding arbitration if a dispute arises. A contract requiring arbitration often recites the ADR organization that supplies the arbitrator and sets the rules for an arbitration. The parties sometimes will have a say in selecting the arbitrator by nominating a candidate, or declining the appointment of an arbitrator that a party believes will view their case unfavorably. The decision of the arbitrator is typically final, and unlike a court trial before a judge, the decision of the arbitrator is usually not appealable. Therefore, the most important aspect in these arbitrations is the selection of the arbitrator at the beginning of the case.
Court-Ordered Arbitration. In Oregon, except for a few types of cases, litigants have a constitutional right to have their case decided by a jury. However, in order to free up the logjam of civil cases in Oregon’s circuit courts, the law requires that in most cases involving $50,000 or less the parties, must first agree to have their case submitted to arbitration. Most cases, in fact, are resolved after an arbitration because the parties believe that they have been allowed to tell their side of the story and “had their day in Court.” And, because the parties must pay the appointed arbitrator for their services as well as their own lawyer, parties have “skin in the game” and must make a practical, frank decision about further investment in their case.
In court-ordered arbitration, the parties have an opportunity to agree upon the arbitrator, who must be an attorney licensed to practice in Oregon. An attorney arbitrator is a legal professional who has expertise in arbitration and is appointed to resolve disputes by overseeing the arbitration process. For private arbitration, ADR organizations maintain a list of their arbitrators, who are usually seasoned and accomplished lawyers, and often are retired judges from a Circuit Court, the Court of Appeals or the Oregon Supreme Court. While any qualified individual can be chosen as an arbitrator, an attorney arbitrator brings a particular set of skills to the table. You must rely on your own lawyer to select the arbitrator because your lawyer will likely know something about the candidates.
When selecting an arbitrator, a party is looking for:
- Legal Knowledge and Expertise: Since arbitration still requires a thorough understanding of the law, an attorney arbitrator’s legal background is crucial. Even though arbitration is more informal, an arbitrator is still supposed to follow the law. An arbitrator should apply relevant laws and regulations to the dispute, ensuring that the decision is not only fair but also legally sound. Their ability to analyze complex legal issues and interpret statutes can be invaluable, especially in cases involving intricate legal questions or contractual disputes. And because most arbitration decisions cannot be appealed, there is no court of appeals available to correct a mistake of law.
- Impartiality and Neutrality: One of the key qualities of any arbitrator is neutrality. Attorney arbitrators are bound by strict ethical codes that prevent them from taking sides, ensuring that the parties involved receive a fair hearing. The best arbitrators are those that have a broad experience in handling a variety of legal cases, which should give them the ability to remain objective.
- Effective Communication: Arbitration proceedings often involve intricate facts and legal arguments. A good attorney arbitrator should be equipped to ask the right questions, clarify points of confusion, and ensure that both sides fully understand the issues at hand. Effective communication also extends to issuing clear and reasoned decisions that the parties can easily follow. Done properly, a good arbitrator will come to the correct legal decision and instill confidence by the parties in arbitration and the larger legal system.
- Knowledge of Arbitration Rules and Procedures: While there are general principles of arbitration, specific industries and jurisdictions often have their own rules. An attorney arbitrator is well-versed in these regulations and ensures that the process adheres to the rules of the respective arbitration forum (e.g., American Arbitration Association or International Chamber of Commerce).
- Efficient Resolution: One of the primary reasons individuals and businesses turn to arbitration is for its efficiency. A good attorney arbitrator is skilled at maintaining a timely process, avoiding unnecessary delays that often plague traditional litigation. With fewer procedural hurdles and more flexible scheduling, arbitration can resolve disputes more quickly than going to court.
- Cost-Effectiveness: Court cases can be expensive, with lengthy trials, attorney fees, and court costs accumulating rapidly. Arbitration is typically a more cost-effective alternative, as the process is often faster and more streamlined. An attorney arbitrator helps reduce costs by eliminating unnecessary procedural steps.
- Confidentiality: In many cases, arbitration proceedings are private, which means that sensitive information and details of the dispute can be kept confidential. For businesses especially, this aspect is crucial in protecting trade secrets, financial data, or other proprietary information. This is why many contracts and sales agreements require private arbitration, because the rules of the arbitrator can require confidentiality.
- Expertise in Specific Areas of Law: For cases that involve highly specialized areas of law—such as construction, intellectual property, or finance—an attorney arbitrator with experience in that field can bring invaluable expertise to the table. Their understanding of industry-specific legal issues allows them to make more informed and accurate decisions.
- Flexibility and Control: Arbitration often allows the parties more control over the process than in traditional litigation. The parties can agree on the rules governing the process, the timeline, and even the selection of the arbitrator. Having an attorney arbitrator means that this flexibility is maintained, while still adhering to necessary legal standards.
- Finality of Decision: While appeals are possible under certain circumstances, arbitration is typically a binding process. The finality of the decision is often seen as a benefit because it avoids prolonged litigation and provides closure to the parties involved.
Notwithstanding the virtues and savings of arbitration listed above, not all cases are well suited to arbitration. Appeals are useful if a Judge makes a prejudicial error during the trial. A Court of Appeals can correct the error. The Court rules exist to avoid a scattered, “shotgun” approach to litigation. Evidence is excluded for good reason, even if doing so prolongs or complicates the case. Eliminating the rules of evidence does not make the evidence presented any better. If an arbitrator makes an error, the decision can only be appealed for arbitrator misconduct. And in many cases the alleged savings is negligible. Circuit Court judges are “free”; the parties must pay the hourly rate of the arbitrator which can make an arbitration more, not less, expensive than a court trial.
Sometimes you have no choice but to submit your case to arbitration. In other cases, you are faced with the decision as to whether to agree to arbitration. In either case, an experienced attorney can advise you on the merits of arbitration in that particular case, help you choose your arbitrator, and guide you through the process and ensure the best possible outcome.