Business-to-Business Arbitration in the United States

Proponents of commercial, or business-to-business (B2B), arbitration point to its potential benefits for dispute resolution compared with traditional litigation, including reduced congestion and costs for the courts, as well as expedited and less costly outcomes. However, a recurring complaint in the press and academic literature is that arbitration has become as costly and time-consuming as litigation, with sharp increases in pre-hearing discovery and motion work. Evidence suggests that arbitration clauses, though common in consumer contracts, are uncommon in domestic commercial contracts, but research on why this may be so is scant. The goal of this study was to use a survey and follow-on interviews of corporate counsel to discover what they thought about the relative benefits of arbitration and litigation in resolving B2B disputes. The findings highlight issues of importance to policymakers and practitioners concerned with arbitration as a valuable alternative to litigation. Key findings were that a majority of respondents believe that (1) contractual arbitration is better, faster, and cheaper than litigation (although most see it as just "somewhat" so); (2) professional arbitrators tend to split awards rather than rule strongly in favor of one party; (3) factors (beyond time and cost savings) encouraging the use of arbitration are avoiding exposure to potentially uncertain jury awards, control of arbitrator qualifications, confidentiality of proceedings and decisions, and complexity of cases and/or contracts; and (4) the one factor discouraging the use of arbitration is the absence of the right of appeal. These results may help to explain the apparent lack of enthusiasm for including arbitration clauses in domestic B2B contracts, but further research is needed.