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Litigation: Avoiding the Arbitration Trap

Courts, bar associations, alternative dispute resolution organizations and private attorneys who serve as arbitrators all frequently laud the benefits of contractual arbitration. Obviously, each has his own financial or institutional bias for encouraging alternative dispute resolutions (ADR); therefore, they frequently describe arbitration as less costly, more efficient and ideally suited for a prompt resolution of disputes with guaranteed finality--a preferable alternative to formal litigation. Unless the contractual arbitration clause is drafted clearly and thoughtfully, however, the risks of arbitration for most corporate clients outweigh the rewards.

I offer no statistical proof for the following hypothesis, only anecdotal experience from more than 20 years of practicing in complex civil litigation in state and federal court systems and in all types of arbitration proceedings: Arbitrations are almost invariably more expensive for parties; less certain and far more contentious than judge-supervised litigation; and, of course, the results are almost never reviewable. Rules (to the extent that any are actually intended to apply) are often flouted, delays are the norm, arbitrator and ADR-facilitator billing is virtually unreviewable, and the results are unpredictable and often based on erroneous and uncorrectable interpretations of law and fact.

Chad Hummel

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