Question

There are clauses in many standard contracts between employees and employers or consumers and sellers that require that all disputes under the contract be submitted to binding arbitration rather than going to court. Why are such clauses popular and what advantages and disadvantages do you see in such clauses?

Answer 1

The arbitration refers to the process of settling disputes without pursuing any legal actions. The decision of the problems is given by the neutral third party, known as an arbitrator, after hearing the problems presented by both parties, employers, and employees. His decision is final and it binds on both employers and employees. The clauses of binding arbitration are getting popular because, with the help of arbitration, the issues are solved more quickly and efficiently compared to the court trials. In courts, it takes years and years to resolve the issue. Other advantages associated with the arbitration is that it saves a lot of time and money which is involved in preparing and filing documents for the court trials. Being less formal compared to court trials, it does not need formal presentation and filing of documents. Moreover, many times an attorney for arbitration is not formally hired. Any neutral third party capable of giving fair decision can be placed at the position of an arbitrator. Along with the advantages of arbitration, there are some disadvantages too. Many times it is possible that employers have an upper hand in the arbitration process as they have more access to documents and other evidence. The decision made by the arbitrator is final and binds on both parties. It cannot be challenged and appealed. However, it is possible to appeal the decision of courts at higher levels.