NCPA - National Center for Policy Analysis

Binding Arbitration Rising

July 15, 2002

Until a decade ago, most arbitrations pitted two businesses against each other in a contract dispute. Then arbitration spread to disagreements between companies and their customers and employees.

Now private, third party adjudicators are being used to resolve many other types of claims -- including personal injuries.

  • The American Arbitration Association -- the only arbitration firm whose finances are available to the public because it's a nonprofit organization --administered more than 218,000 cases in 2001, a 10 percent increase from 2000 and the seventh year that its caseload increased.
  • Association officials say less than 2 percent of the cases were consumer- or employee-related; more than a third were no-fault auto insurance cases in New York, New Jersey and Minnesota.

Increasingly, businesses are putting language in their contracts requiring that all future disputes be handled by a third-party arbitration firm -- usually one selected by the company. Disputes necessitating a court trial often take two to three years -- while arbitration can resolve a dispute in a few months.

Source: Caroline E. Mayer, "No Suits Allowed," Washington Post, July 14, 2002.


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