The Benefits of Arbitration

Arbitration is a way for consumers and businesses to resolve a dispute outside of the traditional court system. A neutral third-party arbitrator hears and decides cases filed in arbitration. Arbitration decisions are binding but cannot be legally enforced until reviewed by a court.

Congress enacted the Federal Arbitration Act in 1925 to establish arbitration as an antidote to the “costliness and delays of litigation.” Arbitration is endorsed by the U.S. Supreme Court as an effective and fair alternative dispute resolution process.

Although arbitration varies based on administrator and dispute, the general benefits of arbitration are:

• Access to Justice
• Simplicity and Flexibility
• Same Outcomes as Court
• Low Filing Fees
• Time is Money
• Relief for Courts and Taxpayers
• Choice
• Fair Decisions
• Arbitrator Review
• Court Review

Additional information and research on arbitration:

• Arbitration Research
• Court Research
• Independent Articles
• FORUM Articles
• About the FORUM
• Media Contact

Access to Justice for Every American. Arbitration provides consumers with a full and fair opportunity to resolve disputes, even for smaller claims that cannot be effectively resolved in court. Consumers are entitled to representation by an attorney, but do not need one to proceed with an arbitration claim. Lawyers are often unwilling to represent consumers with smaller-value claims in litigation, and most consumers require an attorney in order to successfully navigate the court litigation system. Arbitration provides an alternative for all consumers seeking access to justice.

Arbitration Procedures Are Simple and Flexible. Parties can submit and respond to arbitration claims in their own words, and are not bound by the formalities of legal proceedings that could prevent them from telling their story and proving their case. Parties can elect to appear for a hearing in person, via telephone, or simply by submitting documents. Document hearings can save consumers the expense of missing work or travelling to a hearing and can “level the playing field” for legally unsophisticated parties by eliminating situations where they are directly questioned by opposing lawyers. This leads to a lower-pressure environment and makes arbitration more accessible for consumers. All parties have the right to retain a lawyer to represent them in arbitration.

Consumer Outcomes in Arbitration are the Same as in Court. Arbitration provides parties with the same outcomes they would have received in court. Published studies and empirical data indicate that consumers prevail at the same or better rate as they do in court. Outcomes research shows that consumers bringing claims against businesses win 65.5% of the time in arbitration and 61.5% of the time in court. Businesses bringing claims against consumers win 77.7% of the time in arbitration and 76.8% of the time in court. It is important to note that evaluating arbitration outcomes is only meaningful in comparison with court outcomes of similar cases. In court and in arbitration, a large percentage of consumer respondents in contractual debt cases fail to respond or appear. For debt collection matters in particular, lenders prevail 93.8% of the time in arbitration and over 96% of the time in court.

Arbitration Involves Significantly Low Filing Fees. Filing fees start at just $19 for dispute amounts under $1,500, and the shorter duration of arbitration means attorney fees, if applicable, are greatly reduced. The filing fee is less than $50 for a $15,000 claim, and filing fees do not rise above $100 until the claim size exceeds $35,000. In addition to this consumer-friendly fee structure, low income consumers can seek to have all of their fees waived and, upon showing that arbitration fees prevent a consumer from effectively vindicating their claim, fees can be shifted to the business party.

Arbitration Saves Time Over Court. Analysis of consumer arbitration outcomes shows that the average length of a case from filing to award was 4.35 months for claims brought by consumers against businesses and 5.6 months for claims brought by businesses against consumers. To compare, the Bureau for Justice Statistics data on contract lawsuits involving consumers in the 75 largest counties in the United States shows that the average length of a court lawsuit was 19.4 months when filed by the consumer and 15 months when filed by the business.

Arbitration Relieves Overcrowded Courts and Saves Taxpayers Thousands of Dollars per Dispute. Arbitration quickly and cost-effectively resolves hundreds of thousands of disputes every year that would otherwise be clogging our court systems. For example, review of New Jersey judicial budget demonstrates that New Jersey taxpayers save over $3,000 for each civil dispute resolved through arbitration rather than in state court. A review by the Yuma County trial court in Arizona reached a similar conclusion.

Consumers Have a Choice. Fewer and fewer contracts make arbitration mandatory. Many arbitration agreements contain opt-out clauses, which allow consumers to reject arbitration within a certain timeframe while still agreeing to the rest of the contract. Courts decide whether arbitration agreements are fair so one-sided or unconscionable arbitration agreements will simply be invalidated by the courts under well established legal standards that apply to contracts of all types. Moreover, studies show that consumers overwhelmingly favor the use of pre-dispute arbitration agreements in order to preserve access to arbitration.

Arbitration Decisions are Fair. All National Arbitration Forum decisions are made by independent and impartial arbitrators who are experienced legal experts. FORUM arbitrators are former judges or seasoned attorneys with at least 15 years of legal experience. Arbitrators subscribe to the highest standards of professional conduct and follow explicit rules to ensure that parties’ rights are protected and all ethical principles are upheld. Further, outcomes evidence demonstrates that consumers and businesses receive the same fair outcomes in arbitration as they receive in court.

FORUM Arbitrators have Sufficient Time to Review Cases. An arbitrator does not face an overcrowded docket of hundreds of cases of varying types that judges often have to review. FORUM arbitrators have sufficient time to thoroughly review each case to determine which party should prevail under the applicable law, and arbitrators will make extra time available when necessary. A judge simply may not have sufficient time or staff to do what an arbitrator can properly do in handling case dockets. An important distinction between FORUM arbitration and court is that in cases where one party does not respond to an arbitration claim, the arbitrator must review the evidence presented before issuing the award. Unlike in court, no decisions are issued by “default” against the non-participating party.

Arbitration Decisions Must Be Reviewed by Court Judges Before Becoming Legally Enforceable. All arbitration decisions are approved by a judge before becoming a legally enforceable judgment. Moreover, every arbitration award issued by a National Arbitration Forum arbitrator can be reviewed by a judge to determine if the procedures used, the hearing conducted, and the award issued were fair and just under the applicable law. A losing party has the right under the law to challenge or seek to vacate an arbitration award before a judge. A winning party has right to seek to confirm an arbitration award into a civil judgment. The availability of these judicial proceedings further guarantees that arbitrations, including FORUM arbitrations, are fair and just.

Arbitration Research
ADR Preference and Usage Report (in collaboration with General Practice Solo and Small Firm Division [GPSolo] of the American Bar Association)
(Surveys and Ballots, Inc., 2006)

ADR Preference and Usage Survey (in collaboration with Tort Trial and Insurance Practice Section [TIPS] of the American Bar Association)
(Surveys and Ballots, Inc., 2006)

Arbitration – A Good Deal for Consumers: A Response to Public Citizen
(Professor Peter B. Rutledge, April 2008)

Arbitration: Simpler, Cheaper, and Faster Than Litigation
(Harris Interactive, 2005)

California Consumer Arbitration Data Analysis
(Navigant Consulting, 2008)

The Case for Pre-Dispute Arbitration Agreements: Effective and Affordable Access to Justice For Consumers, Empirical Studies and Survey Results
(Various sources, 2004)

Consumer Arbitration Before the American Arbitration Association - Summary of Key Findings
(Searle Civil Justice Institute, March 2009)

The Current State of Consumer Arbitration
Sarah Rudolph Cole and Theodore H. Frank, Dispute Resolution Magazine (Fall 2008)

Key Findings from a National Survey of Likely Voters
(Public Opinion Strategies and Benenson Strategy Group, December 2007)