What are the disadvantage of arbitration?

What are the disadvantage of arbitration?

11-Aug-2021 | Article by Legal White Official

Arbitration is a process which resolves disputes especially business disputes without going through the process of litigation and lengthy court proceedings. It has become quite prevalent since its inception in the year 1996. People and parties prefer using the arbitration process to sort out disputes, however as with anything else, arbitration too has some disadvantages and drawbacks which one needs to be aware of.

 I would like to list some of the downside of arbitration which will help in better understanding of the process and it will also make one more equipped with information while filing for arbitration.

1.     COST – Although one doesn’t require a lawyer for arbitration which lower the cost, however it has been seen in most arbitration cases that, parties take the help of lawyer or they hire lawyers for entire process which makes it expensive. There is also a general recommendation that in order to present a case impressively one should hire lawyer. It has been observed that, arbitration favours big organizations when the opposite party in someone who has less money

 2.     EVIDENCE – In a usual court proceeding, all the evidences are thoroughly analysed and a decision is made on the basis of those evidences which off course takes time, however in arbitration, the analysis done on the evidences are not rigorous due to which this is a high possibility that some of the evidences gets overlooked or may be even rejected. It is likely that the decision is made based on some speculation or suspicion. It may also happen at times that the award is not supported by evidences.

 3.      APPEAL – Unlike courts, where any decision can be challenged, arbitration gives a very little chance to appeal against an award. It should also be mentioned that, the awards are rarely overturned. The party gets the appeal rights only if any of the below conditions are applicable

  • There is open biasness with regards to the arbitrator favouring one party
  • Award passed in grave error or is unsupported by the testimonies or evidences presented in front of the tribunal
  • Hearing conducted in a way which is improper and unprofessional.
  • Procured award through corrupt means, such as bribes etc.

 4.     AWARD ENFORCEMENT – In a court proceeding, there is only 30 days to executive the court order, however in arbitration, it takes way longer to enforce the decision made by the tribunal. The reason for this is because once the order has been passed by the tribunal, a lawsuit needs to be files and the court approves the arbitration award, it takes 90 days to complete this process.

 5.     TRANSPARENCY – As all the arbitration hearings takes place in private due to the fact that there may be private information that might leak which may be detrimental to the business. There have been some questions being raised regarding the transparency and neutrality of the entire process.

 Above are some of the drawbacks, however we should analyse both the sides of the coin before making a decision about arbitration. The Law of the arbitration is constantly monitored by the authorities and steps are being made to make it more streamlined.

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