Debunking Misperceptions: The Upsides of Commercial Arbitration

• Author: Richard H. Silberberg, Neal M. Eiseman
• Pages: 47-52

Published in Litigation, Volume 47, Number 4, Summer 2021. © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not

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Debunking

Misperceptions

The Upsides of Commercial Arbitration

RICHARD H. SILBERBERG AND NEAL M. EISEMAN

Richard H. Silberberg is a partner at Dorsey & Whitney LLP in New York and a past president of the College of Commercial Arbitrators.

Neal M. Eiseman is a full-time neutral with Eiseman ADR LLC.

Arbitration sometimes gets a bad rap. Critics challenge provisions

that bar a consumer or employee from pursuing an individual

lawsuit or class action. They gripe about the privatization of

our justice system, the secrecy of the proceedings, and the at

times arbitrary conduct of arbitrators. Some judges question the

fundamental effectiveness and legitimacy of the entire process.

Proponents point to the beneficial attributes of arbitration,

which led the American Bar Association earlier this year to adopt

a resolution supporting its use as an efficient and economical

method of resolving business-to-business disputes. Supporters

also note the increasingly widespread use of commercial arbi-

tration by the business community, illustrated by an American

Arbitration Association (AAA) report finding that in 2019, and

again in 2020, nearly 10,000 commercial arbitrations were filed,

with aggregate claims each year totaling about $18 billion.

Detractors push back. They say that not all perceived advan-

tages of commercial arbitration truly exist. They note that ar-

bitrating a dispute can be more expensive and time-consuming

than litigating in court. Some criticize the lack of an automatic

review mechanism.

Much of the current controversy focuses on the use of arbi-

tration to resolve consumer complaints and employment dis-

putes. There are legitimate questions about the fairness and

enforceability of forced arbitration agreements, some featuring

class action waivers. Those issues deserve careful scrutiny.

But attempts by some skeptics to paint all forms and aspects of

arbitration with a broadly negative brush stack the deck. Without

acknowledging any of its benefits, they risk undermining the busi-

ness community’s positive perceptions about a process that has

proven effective and efficient at resolving commercial disputes.

Business arbitration should be evaluated on its own merits.

Let’s start with this premise: Neither arbitration nor litigation is

best suited for every commercial dispute. But that doesn’t mean

that those charged with selecting a dispute resolution process

should just flip a coin to choose between them. The distinctions

are significant, and the potential ramifications of choosing one

over the other are substantial and may affect the outcome.

A series of simple questions designed to flesh out which pro-

cess is best for resolving a particular type of dispute suggests that

commercial arbitration is a viable and often preferable choice

for resolving business-to-business disputes. Much of what oth-

ers perceive as its failings are in fact among its virtues. Let’s test

that proposition.

Assume a transaction between two commercial entities en-

gaged in the sale and purchase of goods or services. A monetary

dispute arises over whether the seller breached the contract,