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Mandatory Binding Arbitration

Mandatory binding arbitration requires parties to a contract to resolve disputes through arbitration rather than litigation. It may require waiving the right to appeal the arbitrator's decision. Arbitration involves a neutral third party reviewing the case instead of a judge. Mandatory binding arbitration means the parties must accept the arbitrator's judgment. Critics argue that mandatory binding arbitration clauses in consumer contracts limit customers' ability to sue or participate in class action lawsuits by burying the clause in fine print. There are also concerns about arbitrator impartiality when companies select the arbitrator.

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103 views2 pages

Mandatory Binding Arbitration

Mandatory binding arbitration requires parties to a contract to resolve disputes through arbitration rather than litigation. It may require waiving the right to appeal the arbitrator's decision. Arbitration involves a neutral third party reviewing the case instead of a judge. Mandatory binding arbitration means the parties must accept the arbitrator's judgment. Critics argue that mandatory binding arbitration clauses in consumer contracts limit customers' ability to sue or participate in class action lawsuits by burying the clause in fine print. There are also concerns about arbitrator impartiality when companies select the arbitrator.

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waqas
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Mandatory Binding Arbitration

By MITCHELL GRANT
 Updated Jul 9, 2019
What Is Mandatory Binding Arbitration?
Mandatory binding arbitration is a contract provision that requires the parties to
resolve contract disputes before an arbitrator rather than through the court
system. Mandatory binding arbitration may require the parties to waive specific
rights, such as their ability to appeal a decision.

Understanding Mandatory Binding Arbitration


Arbitration is another form of settlement in which the parties to a contract agree
to have their case reviewed by a third-party that is not a judge. Mandatory
binding arbitration means that the parties are required to use an arbiter, and have
to accept the arbiter’s judgment.

 
For highly important matters with significant impact, arbitration can be performed
by an arbitration committee or tribunal that functions similar to a jury.
When one party in a contract believes that the other party has not upheld the
terms of the agreement, it typically has the right to seek damages in court. If the
case is not settled before reaching court, the court system may award the plaintiff
with monetary damages if it finds that the defendant failed to follow the wording
of the contract.

Criticism of Mandatory Binding Arbitration


Contracts created by banks, credit card issuers, and cell phone companies often
contain mandatory binding arbitration clauses within loans and agreements in
order to prevent customers from being able to join class action lawsuits. In effect,
the provision removes or limits a party, such as a customer, from suing if they
feel wronged.

Because these provisions may be buried in agreements and because arbitration


is often a misunderstood form of settlement, many people don’t know that the
contract removes their ability to sue. By burying the clause in the terms and
conditions, many people are not aware that their rights become significantly
curtailed.

An additional criticism of mandatory binding arbitration, especially in second and


third-world countries, is that the customer, user, or singular person has no say or
power when it comes to choosing an appropriate arbiter. Companies can use this
to their advantage, hiring an arbiter who may seem impartial but is actually linked
to the company, and making a judgment based on the goods of their
acquaintance, instead of on the objective merit of either case.

In many countries, these practices are watched by organizations such as the


Better Business Bureau, ensuring that all judgments are fair, objective, and
without prejudice. It is for this reason that judges will recuse themselves from
cases if they have a personal attachment. The same punishments apply to
companies or individuals who attempt to sway an arbiter. Usually, the overseeing
committee will not show much in the way of leniency.

There do not seem to be many advantages to a mandatory binding arbitration


clause for individuals. Any issue they have could easily be solved in open court,
where the arbiters are truly impartial, and an appeals process exists.

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