Many New York small businesses are turning to arbitration to solve disputes for a variety of reasons. Arbitration is an out-of-court proceeding where parties contract to have a third party neutral, called an arbitrator, hear evidence and then make a decision. Often, parties to a contract agree to arbitration when they sign an agreement, which outlines the location of the arbitration, number of arbitrators and apportionment of fees.
Arbitration can be binding, which means that the parties are bound by arbitrator’s decision, or non-binding (sometimes called mediation), which means that either party may reject the arbitrator’s decision and go to court or binding arbitration.
Arbitration can be voluntary, where the parties agree to arbitrate, or required by a contract or law. It is quite common for parties to a contract to agree to an arbitration clause for disputes arising out of and related to the subject matter of the contract. Arbitration comes with certain advantages to New York businesses. It is usually a faster and simpler process that is easier to schedule than litigation and takes less time. It is also a private proceedings in a setting outside of the public eye of the courtroom. Finally, if the dispute is technical in nature, parties can find an arbitrator with the requisite technical knowledge needed to decide the dispute.
However, there are some disadvantages to arbitration. For example, you have only one chance to win, as a binding arbitration ruling cannot be appealed. Setting aside an arbitration decision in New York is difficult because you would need to prove that the arbitrator was biased or that the arbitrator’s decision violates public policy. Also, arbitrations often have their own rules of discovery that limit what parties can access. Finally, the costs of arbitration can be significantly higher than court filing fees.
Whether your New York small business wishes to pursue arbitration as an alternative to courtroom proceedings or not, you should consider hiring an attorney with knowledge and experience in both arenas.