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What are the disadvantages of using arbitration in civil and commercial disputes?

Karan Larrett

Arbitration is a common method used to resolve civil and commercial disputes, primarily in business agreements, where a mutually agreed-upon third party (an arbitrator) resolves disputes. While arbitration can be an effective process, it also has some disadvantages that users of social media should be aware of.

One significant disadvantage of arbitration is the potential for high costs. Unlike regular court cases, arbitration fees, such as arbitrator's fees, room rental, stenography, and administrative costs, are paid by the parties initiating the dispute. As a result, these charges can rise quickly, making arbitration uneconomical compared to court litigation. Moreover, in arbitration, the parties cannot appeal the decision, and judgments are final. In contrast, court judgments are subject to appeal, which can correct legal errors.

Another disadvantage of arbitration is the loss of public accountability. The procedure is often opaque, and the proceedings occur behind closed doors, making it difficult to know whether the process was fair. Court cases are open to the public, and judgments are readily available, providing greater public accountability and transparency in the legal system, which is critical to maintaining public trust.

Additionally, arbitration might be biased, creating an imbalance between the parties. Parties in arbitration typically select the arbitrators, creating the perception of partiality. The affected person might feel compelled to settle to avoid unfavourable arbitration, which might produce an unjust result. Regular court cases are decided by neutral judges who are ethically obliged to follow the law and are less subject to bias or influence.

Finally, another significant drawback of arbitration is that it may lack the detailed legal reasoning that underlies regular court cases. The process encourages arbitrators to fast-track cases, meaning that they may skip some parts of the legal decision-making process that would be crucial in normal court litigation. This could lead to misunderstandings or limitations in the law's application, resulting in less-fair decisions.

In conclusion, while arbitration is an effective means of resolving civil and commercial disputes, it is not without its drawbacks. High costs, a lack of public accountability, potential bias, and a lack of comprehensive legal reasoning are obstacles that should not be overlooked. Before selecting arbitration over court litigation, it would be wise to carefully consider these and other factors to determine what is best for you.