Arbitration is a way of resolving disputes without resorting to litigation in a courtroom. Instead of a judge and jury, the parties agree upon one or more neutral persons to hear the dispute and make a written binding decision.
Arbitration in South Carolina
Over the past several years, arbitration has been endorsed as having many advantages over litigation and trials. For example, arbitration purportedly avoids hostility between the parties because the parties are encouraged to participate fully and sometimes help to structure the resolution. Nevertheless, the issues at stake are oftentimes no less important to the parties than if they were litigating in a courtroom, and the outcome is no less risky either. Considering that many parties in arbitration are represented by attorneys, the level of hostility is oftentimes the same as if the parties were in trial.
Another example is that arbitration is supposed to be cheaper than litigation. However, it is not unusual for a single arbitrator or a panel of arbitrators to charge several thousand dollars a day for their services. Oftentimes, the costs of arbitrators combined with legal fees and expert witness fees make arbitration just as expensive, if not more so, than a trial.
Arbitration is supposedly faster than litigation, and overall it does appear to be quicker. However, oftentimes arbitration claims that can linger for a year or more before the matter is finally decided.
Arbitration is also supposed to be simpler in that many rules, such as the Rules of Civil Procedure and the Rules of Evidence, are relaxed. However, sometimes these rules do more to protect a party rather than to make the party’s life more difficult. Consider the rule against hearsay – it is designed to prevent someone from testifying about what another person, who is not present at trial, said to them or others. Without a rule against hearsay, an arbitrator is free to consider rumors, gossip, and stories from someone who is not present at the arbitration and therefore cannot be questioned about the truth of their statements.
Arbitration proceedings are generally held in private. Parties sometimes agree to keep the proceedings and terms of the final resolution confidential. However, in South Carolina, an arbitration has to be confirmed/approved by a circuit court judge, at which time the details of the arbitration may be revealed to the public.
One of the reasons why arbitration is considered to be quicker and less expensive than litigation is the fact that there is a very limited avenue of appeal to the court from an arbitrator’s decision. Under South Carolina law, a party may only appeal the decision on such grounds as the arbitrator made obvious miscalculations (mathematical errors), the arbitrator was obviously biased or engaged in fraud, or the arbitrator manifestly ignored the law. Further, because the procedural rules are relaxed in arbitration, oftentimes arbitrators do not have to explain their decision. So, more often than not, no matter how unfair or illogical an arbitrator’s award may be, the parties are often stuck with it and are barred forever from bringing the claim in court.
Arbitration Clauses Aren’t Always Enforceable
When drafting an arbitration clause in a contract, one must be very mindful of certain particulars to ensure the arbitration clause is enforceable. One must also know whether a contract will be governed under the state or federal arbitration act. For example, if a contract is found to be governed under state law, notice that the contract is subject to arbitration must be typed in underlined capital letters, or rubber-stamped prominently, on the first page of the contract. If these requirements are not met, then the arbitration provision of the contract may be unenforceable. Because of nuances such as these, it is usually prudent to have an attorney draft or review any significant contracts before you enter into them. Additionally, if a dispute arises regarding a contract, it is often prudent to have an attorney review the situation and advise you of your rights.
As with trials, different people have different experiences with arbitration. However, before jumping on the Alternative Dispute Resolution (ADR) bandwagon, you should consider the cons of submitting a claim to arbitration in exchange for giving up your day in court.