Arbitration has become a common way to resolve legal disputes between individuals and businesses. When global startups begin their business, they need to consider the pros and cons of arbitration, and whether they want the language in their client contracts to be in favor or against arbitration. Before disputes develop, the startup should have policies in place. A lawyer can help draw up contracts that spell out how disputes will be handled in the future.
Advantages to Arbitration
Cheaper than a Trial
While you should pay for a lawyer to represent your interests at an arbitration meeting, there are less fees and costs associated with arbitration than there is for a court hearing. When you go to trial, you’ll have to pay a lawyer for more than one court appearance plus any filings and work he or she does outside of the courtroom. The arbitration process is less lengthy than a trial.
Avoids Strong Emotions
When both parties are in arbitration together, there’s a sense of coming to an agreed understanding where both parties feel as if they’re being treated fairly. In a court proceeding, one party might feel they are on the losing end. In arbitration, the parties are working together towards a solution that will somehow benefit both of them, so there’s no feeling of winning or losing for either.
Flexible Meetings
A court case must be worked into the schedule of a busy judge who has hundreds of other cases. It could take months to get a hearing date. With arbitration, the parties can work around their schedules. As long as both sides agree on a time, they could have the meetings on the weekends or evenings after other obligations. It wouldn’t need to interfere with work.
Private Matters Kept Private
In a court proceeding, the details and outcome of a trial is a matter of public record. Some people might feel a sense of embarrassment and worry about losing to the opposing side. During arbitration, the meetings are held in private and both parties can agree to keep the details confidential as well as the outcome. This can be good news for a startup who needs to protect their intellectual property from big corporations.=
Rules and Procedures
Rules and procedures that provide structure in a trial or court proceeding are absent in arbitration, which can make the process faster and less complicated. There’s no need to provide witness lists or depositions. The delaying tactics often employed in a trial are not used in arbitration.
Disadvantages of Arbitration
Binding Arbitration
While the meeting between two parties to come to an understanding is much simpler and less steeped in rules, the decision is often binding, which means neither side can bring their claim to court at a later date. This is why it’s important to have an attorney handling the arbitration for the parties involved. An attorney will ensure that their client’s interests are being heard and well represented in the end decision.
Uneven Advantages to One Side
When one side has a lawyer and the other side doesn’t, it can be an uneven playing field for the one without an attorney. When a small business is going against a large corporation, the corporation has more money to invest in the process. With the right attorney, the small business can have a better shot with arbitration than a courtroom where the corporation can delay for months or even years. As long as both sides have an attorney, there’s no disadvantage.
Costs of Arbitration
While there’s less of a cost for arbitration than a full-blown trial, the costs of arbitration are rising. This might make some parties consider going through the process without an attorney, which is the biggest disadvantage you can put on yourself. Both sides need a lawyer to fight for them including a global startup, which has more to lose at the beginning of their business.
Things to Keep in Mind
Overall, arbitration is a less expensive and a less time consuming option than to initiate a court proceeding. There are more advantages than disadvantages to the process too. There are a few things to keep in mind when making purchases or dealing with companies long before arbitration comes into the picture.
Terms of Agreements
Before signing any agreement with a retailer, car salesperson or insurance company, read the agreements that could impact arbitration if there’s a problem later. Often, there are clauses that could cause a problem like having to go through binding arbitration. It limits you from seeking a trial if you need one.
Crafting Your Agreements
When you’re a global startup business, you should consider adding an arbitration clause to your agreements and contracts. This can keep your business from becoming involved in a lengthy and expensive litigation case later. A good lawyer can help you draft an agreement that clients will need to sign before you work with them. Do research online and find information from lawyers who handle arbitration to get a better understanding. As an example, Shahram Shirkhani publishes examples of cases where clients didn’t understand the arbitration process, and they didn’t protect themselves from litigation with specific clauses.
Arbitration is an inexpensive and fast way to bring your grievances in front of another party. When a global startup is building their client base, they need to have contracts in place that will favor an arbitration instead of allowing for litigation. There are more advantages than disadvantages to arbitration as long as you’ve done your research and hired an attorney who will represent your interests during the procedure.
Image credit: CC by Scurzuzu
