Lee Kanon Alpert

Arbitration has been touted as a quick and cost-effective panacea for resolving civil disputes, but it also has been criticized for not living up to many of its claims.

The truth about arbitration and other forms of alternative dispute resolution known as ADR lies somewhere in between. While not quite the ultimate solution to horrendous legal costs and lengthy court battles, ADR can still be a most effective means of resolving certain small-business disputes.

ADR gained popularity in the early 1990s because of the overburdened civil court system. While state and county budget problems reduced available funding to build more court facilities and supply additional judicial officers, the last two decades have seen a boom in litigation. The resulting docket delays mean a steady increase in the overall costs of trying cases.

ADR provides two major types of resolution options arbitration and mediation. Arbitration permits the parties to have an arbitrator or a panel of arbitrators hear and decide the dispute in an informal, non-courtroom setting.

Both sides present their cases before an arbitrator or panel (selected and approved by the parties). A decision is rendered that's usually binding. Cases can be resolved in this way in months rather than years, and while the cost of the arbitrator can be steep (as high as $500 an hour, with expenses usually split by the parties), the cost for this legal process can still be far less than a traditional court case.

Small-business owners should ask the following questions when deciding whether to use arbitration to resolve a dispute:

? Do you want a quick result? Arbitrations take months instead of the customary years to resolve a civil dispute.

? Do you wish to keep the dispute private? While trials are a matter of public record, arbitrations can be confidential.

? Can industry-specific knowledge help resolve the dispute? Arbitrators can be selected from the industry in which the dispute occurred.

? Do you want to select where and when the case will be decided? Arbitrations take place at a mutually agreed-upon location and time.

The key to a successful resolution through arbitration is the skill level and impartiality of the arbitrator or panel. If your opponent regularly hires a specific arbitrator to hear cases (and the outcomes tend to favor your opponent), you might want to think twice about agreeing to use that arbitrator.

One drawback to arbitration (which some consider a strength) is the finality of the arbitrator's decision. Except in rare instances, it's final. If an arbitrator is incompetent or has an undisclosed or undiscovered bias, the binding decision might be incorrect. In that case, the losing party could be without a legal avenue to argue its arbitrator-related grievances.

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