Arbitration: The “New Litigation”

Provisions for binding arbitration of disputes are now employed in virtually all kinds of contracts, making arbitration a wide-ranging surrogate for civil litigation. This has also subjected arbitration to unprecedented strains and unparalleled criticism. Once promoted as a means of avoiding the contention, cost, and expense of court trial, binding arbitration is now described in similar terms—“judicialized,” formal, costly, time-consuming, and subject to hardball advocacy. Though “court-like” arbitration has alienated many business users, others strive to make arbitration even more like court trial, as through agreements for expanded judicial review of arbitration awards. Meanwhile, the emergence of mediation and other “thin-slicing” methods for resolving disputes more quickly and effectively has raised serious questions about the value of arbitration and its continuing role in the conflict resolution marketplace.Additionally, broad judicial enforcement of arbitration provisions in standardized adhesion contracts governing employees and consumers has fueled impassioned debate over the need for regulation of arbitration agreements. The real concerns of reform advocates, lawmakers, legal commentators, and educators have produced strong responses that “spill over” into the realm of arm’s-length business-to-business agreements—often imposing new transaction costs without commensurate benefits.These developments point to a critical need for more effective exercise of choice by users of arbitration and others whose decisions affect the arbitration experience. The most important difference between arbitration and litigation—and the fundamental value of arbitration—is the ability of users to tailor processes to serve particular needs. In order to make the most of the promise of arbitration, contract planners and drafters must move beyond a monolithic one-size-fits-all view of arbitration and make deliberate process choices based on client goals and priorities. The need for a more nuanced approach also requires planners to strategically assess arbitration’s particular value in a world of expanding process choices. Similarly, those who make or propose laws affecting arbitration and those who prepare tomorrow’s lawyers must look “beyond the monolith” to understand that regulation that is essential in one transactional setting may be detrimental in another.

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