When Does It Make Sense to Consider Commercial Arbitration?
While litigation is always an option for resolving commercial disputes, it isn’t always the best option available. In many cases, alternatives to litigation can prove to be more cost-effective while providing other benefits as well. An experienced Miami commercial litigation attorney will help business owners, executives and in-house lawyers carefully weigh all options and choose the most advantageous path forward. Oftentimes, this path will involve pursuing commercial arbitration.
Commercial arbitration offers several potential benefits. While it isn’t the right solution in all cases, it often makes sense as a relatively efficient (and fully confidential) alternative to courtroom litigation. So, when does it make sense to consider commercial arbitration? In this article, we provide an overview of some key considerations.
7 Reasons to Consider Commercial Arbitration
There are several reasons why business owners, executives and in-house lawyers might want to consider commercial arbitration as an alternative to commercial litigation. Again, while arbitration isn’t always the smart choice, it is a popular alternative for a reason. Some of the main reasons to consider arbitration when facing a commercial dispute include:
1. Arbitration is Required
While litigation is generally always an option, commercial parties can take this option off of the table by agreeing to mandatory arbitration. It is fairly common for commercial parties to agree to mandatory arbitration during the contract negotiation process, and mandatory arbitration clauses in commercial contracts are generally enforceable under Florida law.
If arbitration is required, then this may be the only option worth considering—aside from attempting to negotiate an amicable resolution without initiating formal dispute resolution procedures. If a party that has agreed to a mandatory arbitration clause attempts to initiate litigation, the other party can file a motion to compel arbitration in court. Ultimately, these preliminary proceedings may do little more than add time and cost to the dispute resolution process.
2. Arbitration is Private and Confidential
Regardless of whether arbitration is required, it is often worth considering as a means of dispute resolution due to its private and confidential nature. While pleadings, motions and other filings in courtroom litigation may become public record, filings and evidence submitted in arbitration proceedings are usually subject to strict confidentiality protections. Generally, it is in both parties’ best interests to maintain confidentiality, and the desire to maintain confidentiality will often be one of the few goals that disputing commercial parties have in common.
With that said, publicity can provide leverage in some cases. If only one party has an interest in keeping a dispute private (and the dispute is not subject to a mandatory arbitration clause), then keeping the possibility of litigation on the table can be a highly effective tool in settlement negotiations.
3. Arbitration is Generally Less Costly Than Litigation
Since commercial arbitration involves streamlined procedures and a condensed timetable, it is generally less costly than commercial litigation. This is another factor that will often (though not always) be seen as a benefit by both parties. Additionally, unlike mediation—which also has its place—arbitration results in a binding decision rendered by a third-party neutral. Thus, with arbitration, there is a definite end in sight, and this effectively places an upper limit on the costs involved in achieving a final resolution.
4. Arbitration is Generally Quicker Than Litigation
While some commercial disputes are not time-sensitive, many are. Additionally, even when the outcome of a dispute doesn’t necessarily have implications for either party’s business operations (i.e., if the parties have already decided to go their separate ways), both parties will often have an interest in resolving their dispute quickly and getting back to business as usual.
This is another area where arbitration offers benefits compared to litigation. With its streamlined procedures, arbitration typically moves quicker than litigation. While the parties still have enough time to conduct discovery, prepare their evidence and arguments, and negotiate if desired, arbitration will usually go to a hearing faster than litigation will go to trial.
5. Arbitrators Are Experts, While Jurors Are Not
In commercial arbitration, the outcome is determined by either a single arbitrator or a three-member arbitration panel. The arbitrator or arbitrators are selected based on their personal expertise. Thus, arbitrators are generally familiar with the substantive issues involved in commercial disputes, and this helps to further streamline the process while also helping to ensure a fair and reasoned outcome.
In contrast, jurors are not experts. Educating the jury takes time (and costs money), and it is never a sure thing. As a result, particularly in breach of fiduciary duty cases, partnership and shareholder disputes, and other complex and highly technical commercial disputes, the ability to present the case to an arbitrator or arbitration panel can also be a key benefit.
6. Arbitration Provides Flexibility
Arbitration also offers significant flexibility in comparison to litigation. In arbitration, the parties play a role in choosing the arbitrator or arbitrators, and they also play a role in setting the timetable. Since the rules of discovery and evidence generally don’t apply, the parties have a significant amount of flexibility to establish the parameters that govern the arbitration process as well.
7. Arbitration Provides Finality and Access to Enforcement Mechanisms (if Needed)
Finally, while arbitrating keeps the parties’ dispute out of court, arbitration still provides a final and binding resolution. If necessary, the prevailing party in commercial arbitration can go to court to enforce the arbitrator’s or arbitration panel’s decision. Additionally, while arbitration decisions can be challenged under the Federal Arbitration Act (FAA), the grounds for reversing an arbitration award are generally more limited than the grounds for appealing an unfavorable verdict at the trial level.
Speak with a Miami Commercial Litigation Attorney in Confidence
Each Miami commercial litigation attorney at Edelboim Lieberman has significant experience representing commercial parties in a wide range of disputes. If you have questions about commercial arbitration and would like to speak with one of our attorneys in confidence, please call 305-768-9909 or contact us online to arrange an initial consultation.
