If a business dispute arises, filing a lawsuit should be considered a last resort. Litigation is costly and time-consuming, and offers the potential for the process to drag on through discovery and appeals.

Arbitration can be an attractive alternative for parties seeking a faster resolution to their dispute that is still enforceable and legally binding. There are some situations, though, when arbitration may not be viable. Let’s explore those possibilities.

Conditions for Arbitration

Arbitration clauses are often included in business contracts. The contract will have language mandating the use of arbitration if disputes arise.

Even if your contract does not include an arbitration clause, you can still engage in arbitration if both parties mutually agree on it. If one party does not agree, though, there is no way to force them into arbitration without a binding agreement. In this case, litigation might be your only option.

The Benefits of Arbitration

Arbitration has a number of benefits over litigation, including:

• Privacy: Arbitration is a private process, making it suitable for businesses that want to keep the details of the dispute and its resolution confidential, unlike court proceedings which are typically public.
• Speed: Arbitration can often be quicker than litigation, which can take years to resolve if courts are backlogged.
• Expertise: Arbitrators often have specific expertise in the industry or legal area relevant to the dispute, which can lead to a more informed and appropriate resolution.
• Flexibility: Parties have more control over the arbitration process compared to court proceedings. They can choose the arbitrator(s), define procedural rules, and select the time and place of hearings.

Cost: If the process is streamlined, arbitration can be less costly than litigation. However, this is not always the case, as fees and administrative costs can add up.

Situations Where Arbitration May Not Be Viable

Arbitration may not be viable in the following circumstances:

• Lack of Agreement: If one party refuses to agree to arbitration, it cannot be forced unless a contract clause mandates it.
• Need for Precedent: If there is no legal precedent for your case, then establishing a precedent and detailed public record through litigation might be preferred.
• Discovery Requirements: If extensive discovery is needed, litigation may be more suitable, since arbitration can have more limited discovery processes.
• Appeal Rights: Arbitration decisions are difficult to appeal, so if the parties want the option to challenge the decision, then litigation might be the better option.

If you’re considering arbitration and need legal advice on business matters, contact Los Angeles business attorney Peter Bronstein. He’ll help you find the best path forward toward a speedy and fair resolution to your business dispute.