What do I give up by agreeing to arbitration?

You give up your right to a jury trial, extensive discovery (document gathering), the ability to appeal most decisions, and often the ability to participate in class actions. Proceedings are also private, which can help or hurt depending on circumstances.

Is arbitration cheaper than going to court?

It depends. For simple disputes, arbitration is often faster and cheaper. For complex cases, it can be more expensive because you pay the arbitrator's hourly rate while judges are paid by taxpayers. Arbitrator fees can range from $300-$1,000+ per hour.

Can I refuse to sign an arbitration agreement?

In many employment or consumer situations, refusing means you don't get the job or service—it's effectively mandatory. In negotiated business contracts, you may have more leverage to modify or remove arbitration provisions.

Arbitration vs Litigation: Pros and Cons Explained

Many contracts require disputes to go through arbitration instead of court. Before agreeing to an arbitration clause, understand what you're giving up—and what you might gain.

What is Arbitration?

Arbitration is private dispute resolution where a neutral arbitrator (often a retired judge or lawyer) makes a binding decision instead of a court. Key features:

Private: Proceedings are confidential
Binding: Arbitrator's decision is final with very limited appeal rights
Faster: Usually resolves quicker than court litigation
Less formal: Relaxed rules of evidence and procedure

What is Litigation?

Litigation is the traditional court process with judges, juries, and formal legal procedures:

Public: Court records are generally open
Appeal rights: Decisions can be appealed through multiple levels
Discovery: Extensive document and testimony gathering
Jury option: Right to jury trial in many cases

Arbitration: Pros and Cons

Potential Advantages

Speed: Often resolves in months vs years
Cost: Can be cheaper for simpler disputes
Privacy: No public record of the dispute
Expertise: Arbitrator can be chosen for industry knowledge
Flexibility: Procedures can be customized
Finality: No lengthy appeals process

Potential Disadvantages

No jury: You give up your right to a jury trial
Limited discovery: Harder to get documents from the other side
Limited appeal: Stuck with the decision even if you think it's wrong
Cost: Can be more expensive for complex cases
Potential bias: Arbitrators may favor repeat corporate clients
No class actions: Many arbitration clauses prohibit class actions

Who Benefits from Arbitration?

Generally Favors Companies When:

They're repeat players with arbitration experience
They want to avoid negative publicity
Class actions would be more damaging than individual cases
The company has stronger negotiating position

May Favor Individuals When:

The dispute is straightforward
Speed is important
You want privacy
The arbitration agreement is truly fair

Key Terms in Arbitration Clauses

Arbitration Provider

Common providers include AAA (American Arbitration Association), JAMS, and others. Each has different rules and fee structures.

Location

Where must arbitration occur? Being forced to travel across the country could make pursuing a claim impractical.

Cost Allocation

Who pays the arbitrator's fees? Some clauses require the company to pay; others split costs or require the claimant to pay.

Class Action Waiver

Many arbitration clauses prohibit class actions. This is often the primary reason companies want arbitration.

Can You Negotiate Arbitration Clauses?

In employment or consumer contexts, often not—it's take it or leave it. But in business contracts:

Request mutual arbitration (applies to both parties' claims)
Negotiate a nearby location
Push for fair cost sharing
Consider carve-outs for certain claim types
Negotiate the right to limited discovery

Arbitration vs Litigation: Which Protects You Better?