Private arbitration has several advantages over litigation in a court of law. One is that arbitration takes place mostly in private. Unlike litigation, which is conducted in public and leaves behind publicly-available records, arbitration typically does not leave behind a public record of filings which could embarrass the parties involved in the dispute.
Arbitrators Know Design and Construction
Arbitration enables parties to use expert decision-makers familiar with construction industry norms to resolve their disputes. Construction arbitrators are typically knowledgeable about construction law and practice and are more likely to produce high-quality decisions than most judges. Most judges are “generalists” who can study the law and render decisions. Design and construction arbitrators, by contrast, tend to be experienced design and construction attorneys who know design and construction.
Disputing Parties Have “Bought In” to the Arbitration Process
Arbitration is governed by the agreement of the disputing parties. The parties’ contracts – combined with the rules of organizations like the American Arbitration Association or JAMS or ADR Systems – guide the arbitrator selection process and determine the identity and number of arbitrators who will resolve the dispute. Because the parties have consented to arbitrate, and because they play a role in arbitrator selection, there is an assumption that the parties have “bought in” to the process and will therefore accept the results of the arbitration.
Arbitration Can Promote Early, Cost-Efficient Dispute Resolution
Arbitration can be less time consuming and more cost efficient than litigation. Parties can streamline the process leading to an arbitration hearing, and the hearing itself can be streamlined. Unlike litigation, arbitration does not rely on strict rules of evidence or civil procedure. And discovery in arbitration, while typically permitted, is usually much more limited than discovery in trial court proceedings. While depositions are common in the arbitration of large-dollar or complex disputes, attorneys are rarely permitted to take as many depositions as they would in litigation. Arbitration relies more heavily on collaborative document exchange and sharing expert witness reports to prepare for arbitration hearings.
Arbitration Awards Are Difficult to Appeal on the Merits
Arbitration awards are more “final” than trial court judgments, which can be readily appealed on the merits (one of the advantages of litigation). Once an arbitration award is confirmed through streamlined judicial processes, it is enforceable as a court judgment. But unlike a trial court judgment, an arbitration award typically cannot be appealed for a review on the merits of the arbitrator’s decision. A party may ask a court to vacate an arbitration award only on narrow and statutorily prescribed grounds. At first, this might not sound like an advantage. However, that arbitration awards typically cannot be appealed on the merits of the arbitrator’s decision tends to make arbitration must faster, and more cost efficient, than litigation.
Privately Administered Arbitration Is (Mostly) Confidential
Privately administered arbitration proceedings are also more confidential than most court proceedings. This is a big advantage for players in the design and construction industry who want to avoid having to explain their past disputes to potential new clients. While many judicial filings are publicly available, private arbitration proceedings are generally confidential. Agreements to arbitrate and the rules of agencies that administer arbitrations can also require parties to keep an arbitration award confidential. Of course, a court proceeding to attack or enforce an arbitration award generally is not confidential.
Conclusion: It is Complicated
The choice between arbitration and court litigation complicated. Arbitration is no panacea. Some disputes are definitely better suited to litigation in a court of competent jurisdiction than arbitration. However, on the balance, arbitration has many advantages over court litigation.
Some of this content first appeared in Chapter 20 (Arbitration) of the Illinois Institute for Continuing Legal Education’s (IICLE) book entitled “Construction Dispute Litigation,” coauthors Paul M. Lurie and Jeremy S. Baker.
This publication is prepared for the general information of friends of Baker Law Group LLC in Illinois. It is not legal advice for you, or legal advice regarding any specific matter. Jeremy S. Baker is licensed to practice law only in Illinois. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome.