When you find yourself involved in a business dispute, you may decide to arbitrate before proceeding to litigation. Your business contract may also include a mandatory arbitration clause, requiring you to try arbitration.
Arbitration is common in the business world, with litigation often being viewed as a last resort. There are many reasons to arbitrate a dispute.
Benefits of arbitration
Aside from generally being quicker and less expensive than litigation, arbitration usually helps both sides maintain a professional relationship after the dispute is resolved.
Running a successful business in Maryland depends in large part on having good business relationships. Ruining a relationship over an isolated dispute could hurt your business in the long run.
Rather than bringing your issues to court, arbitration allows you to submit your issues and present your case to an arbitrator or panel of arbitrators.
Before arbitration begins, you and the other party can agree on what procedures and rules will be followed. Although arbitration is a formal proceeding, many courtroom formalities do not apply.
For example, the rules of evidence that apply in litigation may be relaxed or non-existent in arbitration. Formal discovery procedures are usually not necessary.
The arbitration itself
Arbitration usually begins with each side making an opening statement. Next, the plaintiff presents their case, providing testimony and documentation. The defendant will have an opportunity to question the plaintiff’s witnesses.
The defendant presents their case next, with the plaintiff receiving an opportunity to question the defendant’s witnesses. When both sides have presented their case, they may make a closing argument.
After considering both sides, the arbitrator or panel of arbitrators makes a decision. The decision is typically final and legally binding, as with a court order.
Arbitration versus mediation
This is an important distinction between arbitration and mediation. In mediation, the mediator advises the parties on potential resolutions but has no power to decide the dispute themselves. Mediation is often used as a first step before arbitration. If both mediation and arbitration fail, the matter could proceed to litigation.