Historically, litigation has been the most common way of resolving financial disputes, costing corporations hundreds of thousands of dollars in legal fees and overhead. However, it's not the only option you have to solve problems.

Arbitration is used more frequently as a means of conflict resolution as an alternative to litigation. It is an approach to solving problems in a more cost-effective and less aggressive way than the traditionally adversarial process. However, arbitration is not appropriate in all cases. We will examine what arbitration is and when arbitration may be suitable for resolving your financial disputes.

What is arbitration?

Arbitration, a part of Alternative Dispute Resolution (ADR), is an alternative to litigation and a decision by the parties to solve their issues privately rather than through the public court system.

When is arbitration appropriate?

Both parties must choose to arbitrate. If one party wants to arbitrate and the other party does not, then the issue cannot go through arbitration unless there is an arbitration clause in a contract that both parties' sign.

Arbitration is private; instead of a judge making decisions for the parties, the decision-making power is voluntarily surrendered by the parties to the arbitrators. The parties choose their arbitrators, giving them more control over who oversees and makes decisions on their issues. In some instances, there is a panel of two or more arbitrators.

Even though arbitration is not a courtroom, the decisions made in arbitration (the “arbitration award”) are usually binding, except for certain allowances to challenge the award in front of a judge.

In conclusion, arbitrating financial matters instead of litigating them can be cost-effective and faster than going to court. However, it is important for both parties to be on the same page about what arbitration means and what to expect.