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What Is Binding Arbitration?

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These days many of us will be expected to sort out our grievances with a company through binding arbitration. There are pros and cons to this type of grievance resolution and there are those who claim it is unfair. This is something that we will often voluntarily give our consent to, but many of us might not understand the implications of what we are agreeing to at the time. There are also times when binding arbitration is mandatory. This is not to say that binding arbitration is necessarily a bad thing; it can actually work out well for the person making the complaint and it is now becoming common practice in many industries.

So What Is Binding Arbitration?

Binding arbitration refers to a situation where an independent third party is brought in to solve any disputes. It is viewed as an alternative method for solving disputes and it is often preferred by companies. When problems are solved using this type of process then there is far less chance of bad publicity for a business; everything is sorted quietly by an arbitrator who is able to give a fair decision based on the evidence provided by both sides. If an individual agrees to binding arbitration then they have given up their right to appeal by other means. This means that if things don’t go the way they want during arbitration then they have no other means of recourse.

As well as the fact that it avoids a lot of bad publicity a business might also choose arbitration because it is far more cost effective. Fighting a legal battle can be an expensive enterprise and using binding arbitration avoids all this. Another benefit is that they avoid having to disclose private information to clients; something that might be required during legal proceedings during discovery.

Is Binding Arbitration Fair?

There are many people who worry that binding arbitration just isn’t fair; especially when it is mandatory for the customer to agree to this. There are now many agreements that hinge on the customer agreeing to binding arbitration; this seems to be increasing as a requirement when borrowing money. People may feel pressurized into given up their rights due to their desire to borrow money. It is also quite common for people to agree to this clause in the contract without realizing the full consequences of what it means.

There is always the worry that the arbitrator just isn’t as neutral as others would have us believe. In fact this person might have their own agenda and this could lean in favor of protecting the interest of the business rather than the person making the complaint. It also should be noted that there is usually some type of fee associated with bringing a complaint through arbitration and this might be more expensive than hiring legal representation.

There are certainly pros and cons to binding arbitration, but it is understandable why businesses prefer this option. Legal costs are just too high and a lot of companies feel that this is their only solution.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.


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