Binding or incentive arbitration structure
Would you prefer a binding or incentive arbitration structure? Does it depend on the nature of the dispute? Or the disputants?
Sample Solution
Binding arbitration is a type of arbitration in which the arbitrator's decision is final and binding on both parties. This means that the parties cannot appeal the arbitrator's decision to a court. Binding arbitration is often chosen by businesses because it is a faster and more cost-effective way to resolve disputes than litigation.Full Answer Section
Incentive arbitration is a type of arbitration in which the arbitrator's decision is not final and binding on both parties. Instead, the parties agree that they will be bound by the arbitrator's decision if they do not reach a settlement by a certain date. Incentive arbitration is often chosen by parties who want to try to resolve their dispute through negotiation, but who want the option of having an arbitrator decide the dispute if they are unable to reach a settlement. Whether you prefer binding or incentive arbitration will depend on a number of factors, including the nature of the dispute, the disputants, and your own personal preferences.- Nature of the dispute: If the dispute is complex or involves a lot of money, you may prefer binding arbitration. This is because binding arbitration will provide you with a final and binding resolution of the dispute. If the dispute is less complex or does not involve a lot of money, you may prefer incentive arbitration. This is because incentive arbitration gives you the option of trying to resolve the dispute through negotiation, and it allows you to avoid the cost of an arbitrator's decision if you are able to reach a settlement.
- Disputants: If the disputants are likely to be cooperative, you may prefer incentive arbitration. This is because incentive arbitration gives the disputants the opportunity to try to resolve the dispute themselves, and it may lead to a more mutually agreeable outcome. If the disputants are likely to be adversarial, you may prefer binding arbitration. This is because binding arbitration provides a more certain outcome, and it may discourage the disputants from engaging in protracted litigation.
- Personal preferences: Ultimately, the decision of whether to choose binding or incentive arbitration is a personal one. You should consider all of the factors involved in your dispute and choose the structure that you believe is best for you.
| Characteristic | Binding arbitration | Incentive arbitration |
|---|---|---|
| Finality of decision | The arbitrator's decision is final and binding on both parties. | The arbitrator's decision is not final and binding on both parties. |
| Cost | Binding arbitration is generally less expensive than litigation. | Incentive arbitration is generally more expensive than binding arbitration, but less expensive than litigation. |
| Timeliness | Binding arbitration can be faster than litigation. | Incentive arbitration can be even faster than binding arbitration. |
| Flexibility | Binding arbitration is less flexible than litigation. |