Five Common Types of Arbitration

Many people choose arbitration as an alternative to traditional litigation because it is a less costly and time-consuming process. Arbitration is a legal process that resolves disputes between two or more parties without taking them through the formal court system.
 
Because arbitration hearings are not open to the public and proceedings are not considered public information, they are commonly preferred for cases dealing with sensitive issues.

Debt Arbitration

Debt arbitration is used in the practice of debt settlement, usually as a way of avoiding bankruptcy. In debt arbitration, a neutral arbitrator is hired by the client to negotiate out-of-court settlements for bills, lawsuits, liens, judgments or other forms of debt.
 
While an individual may voluntarily choose to initiate the process of debt arbitration, it alternatively may be ordered by a bankruptcy court. Usually, debt arbitration is intended for individuals who are at least $10,000 in debt or are more than three months behind on payments.
 
Instead of filing bankruptcy, which is public record and affects an individual's credit report, a debtor can maintain the privacy of his or her financial information by means of debt arbitration.

Securities Arbitration

In the U.S., most legal disputes between brokerage firms and their customers are resolved through a process known as securities arbitration. If a brokerage customer believes his or her broker to be at fault for some financial negligence or unlawful activity, (s)he may pursue securities arbitration.
 
The benefits of choosing arbitration over litigation in securities cases include reduced expenses and a more expedient process. Securities arbitration may save both parties from months or years of judicial deliberation, as well as all the cost of related fees.
 
The drawback in opting for arbitration is that all parties involved must waive their rights to a trial in court. A case can no longer be brought through the traditional court system after parties agree to resolve it by means of arbitration securities.

Credit Card Arbitration

Many credit card companies tend to include arbitration clauses in the fine print of their customer terms and conditions contracts.
 
An arbitration clause is a pre-dispute agreement that provides that if any conflict should arise between two parties, it will be resolved by arbitration.
 
The benefit of using arbitration for credit card cases is that it can save both parties (the individual and the credit card company) money by avoiding the expensive litigation process.
 
A potential drawback of seeking arbitration for such cases, however, is that it can result in an unfair advantage for credit card companies. In a worst case scenario, credit card companies may offer hidden incentives to arbitrators, influencing them to rule in favor of the company in credit card arbitration.

Divorce Arbitration

Many couples seeking divorce choose arbitration over the traditional litigation process. Arbitration has the benefit of being more informal, less expensive, and private. Because divorce can often bring up sensitive issues for both parties, arbitration is often a favorable option.

To pursue divorce arbitration, couples must first select a neutral party (arbitrator). If husband and wife are unable to agree upon an arbitrator together, they can follow a general procedure to be randomly matched with an arbitrator.

Both parties must then supply the arbitrator with a list of key issues and agree to resolve the issues outside of court. Many couples are able to reach a compromise more quickly and efficiently than they would in court by using divorce arbitration. 

Labor Arbitration

Labor arbitration is a process used to resolve disputes in the workplace that occur between employer and employee. For example, labor arbitration has been proven as an effective means for resolving worker strike situations.
 
Disputes resolved by labor arbitration typically involve common issues such as salary pension, benefits or termination. In cases where disputes involve a great number of employees or contain confidential material that an employer may prefer not to bring to public court, parties may opt to solve the dispute by means of labor arbitration.
 
Resources
 
Astarita, Mark (n.d.). Overview of the Securities Arbitration Process. Retrieved March 10, 2008 from the SEC Law Web site.

Schneider, Arlene (2005-2008). Is debt settlement for you? Retrieved March 10, 2008, from Articlesnatch Web site.

Equality in Marriage Institute (2006). If You Choose Arbitration. Retrieved March 10, 2008, from the EqualityInMarriage.com Website.