As attorneys, we are constantly discussing with our clients whether or not to include certain clauses in contracts. During the drafting process, a common question we ask is whether the client would like to include an arbitration clause. As seasoned commercial litigators, we have to say that is a somewhat unfair question to thrust on someone who likely has no idea what arbitration even is.
Simply put, arbitration is private court (sounds classy right?). The parties to the contract agree in advance that in the event of a dispute arising related to the contract, that dispute shall be heard by a specific panel or even by just a specific party. Arbitration can be binding (both parties waive their right to a trial) or non-binding.
So, what are the advantages and disadvantages? Well, these agreements can limit discovery, provide for a quicker resolution when compared to normal litigation, simplify rules of evidence and procedure, provide privacy, and can be less expensive. However, in the event that arbitration cannot settle the dispute, arbitration can add cost and time to the dispute resolution process if the dispute ends up in court anyway. Additionally, if a dispute goes to arbitration, there is no review process for arbitration in the same way there is an appeals court for trial courts.
Experienced Florida commercial litigation attorneys know that with arbitration’s promised speed comes its other follies. So, what is the right answer? It depends on the situation, but there are some simple basic questions a Florida business lawyer may ask you to consider when you are considering an arbitration clause:
- Cost – Arbitration involves paying a neutral third party to administer the dispute, it often involves “administrative” expense as well that can easily exceed the nominal filing fees that courts require. But, it can avoid years of attorney’s fees and court costs if settled quickly and efficiently. So – is the cost of an arbitrator and his administrators going to cost you more than defending or prosecuting your claim? If so, arbitration may not be the way to go.
- Privacy- Keep in mind that a benefit to arbitration is less of your dirty laundry gets aired out in public filings, that are pretty easy to access and search online.
- Speed – If speed is the name of the game, arbitration is likely your friend. But be sure to ask an experienced transactional attorney in Florida if you can limit things like the time for the dispute to be heard, discovery etc.
- Finality – For binding arbitration, there are limited opportunities for appeal. That gives finality to the arbitration that is not often available with a trial decision, which may be subject to appeals, new trials, and further appeals.
Speak to an experienced Florida commercial or business attorney when drafting corporate documents to ensure any arbitration clause added into an agreement is a good fit for you. AC Law provides transactional and litigation related attorney and legal services throughout the State of Florida, contact us today.