4 Types of Arbitration

by James A. Gage

When we think about arbitration, we think of a neutral third party who is empowered by 3 individual parties to decide the outcome of a dispute, but that is just scratching the surface as we will soon see.

There are 4 types of Arbitration: Binding, non-binding, court appointed and what I invented and advocate “Independent Arbitration”.

Binding Arbitration: The parties agree to waive their right to go to court for a judicial decision which is binding by the arbitrators ruling.

Non-Binding Arbitration: The parties have the discretion to abide by the arbitrator's decision or seek other venues. In my 20 plus years of arbitration experience this is the least appealing and successful form of arbitration; only the attorneys and arbitrator make money, and the parties rack up the venue bills.

Court Appointed Arbitration: Is just that ordered by the court. The judge elects an arbitrator of their choice to hear and render a ruling – which by the way is binding.

And finally, we come to what I invented and strongly advocate as a business model...

Independent Arbitration: Some have connected this form of arbitration with names like dispute resolution, ADR, debt settlement, debt arbitration and debt negotiating to name a few. However, with this type of arbitration you will notice vast differences. With this type of arbitration we represent only one party (usually the defendant if it happens to be a litigation case). We do not stay neutral in the dispute, but rather work as a fiduciary, representing our client to achieve out of court settlement, IRS tax issues and delinquent accounts payable.

We set our own fees based on what we achieve for settlement for our clients, not an hourly rate like attorneys. And since we are not employed by agencies like the above 3 forms of arbitration, we are free to work as much or as little, increase or modify our fee structure, and work as much or as little as we desire.

Why Would A Business Choose To Use An Arbitrator Instead of An Attorney?

Few businesses elect the expense of litigation if arbitration is available. Put simply, arbitration is a business like forum for resolution of business disputes and while the elaborate safeguards of the legal system are often not available, the need for prompt and private resolution of disputes seems to convince most of our business clients to use independent arbitration. For those clients used to non American systems of law, arbitration seems a welcome and familiar way to resolve disputes and protect the rights of all concerned. Besides attorneys work a principle called billable hours, we work on results! If we do not settle the case we don’t get paid, whereas, attorneys get paid whether they settle the case or not; you can see why this would be a motivating factor when a business owner is deciding who to engage to represent them.