To an extent, some of the disadvantages of arbitration are the same as the advantages, just viewed from a different perspective. For example, less discovery may be generally viewed as an advantage. Nonetheless, certain kinds of disputes, which typically involve extensive discovery, such as antitrust disputes, are increasingly arbitrated. These kinds of disputes often require the aggrieved party to prove a violation that it can only prove if it has sufficient access to documents under the control of the offending party. Less discovery in this kind of case means less of a chance for a claimant to meet its burden of proof.
Moreover, the lack of any right of appeal may be a benefit in terms of ending the dispute, but if an arbitrator has rendered a decision that is clearly wrong on the law or the facts, the lack of ability to bring an appeal can be frustrating to a party. For this reason, some parties in the United States have written into their arbitration agreements a right to a judicial appeal on the merits of an arbitration award. The federal circuit courts are divided on whether this is permitted under the Federal Arbitration Act. The issue will be decided by the U.S. Supreme Court in the term beginning in October 2007.
Another disadvantage is that arbitrators have no coercive powers – that is, they do not have the power to make someone do something by being able to penalize them if they do not. A court, for example, can impose a fine for contempt if someone does not comply with a court order. Arbitrators, on the other hand, cannot impose penalties, although they can draw adverse inferences if a party does not comply with an order of the tribunal. However, with respect to non-parties, arbitrators generally have no power at all. Thus, it may be necessary at times for the parties or the tribunal to seek court assistance when coercive powers are necessary to ensure compliance with the orders of the tribunal.
Moreover, in multiparty disputes, an arbitral tribunal frequently does not have the power to join all relevant parties, even though all may be involved in some aspect of the same dispute. Because the tribunal’s power derives from the consent of the parties, if a party has not agreed to arbitrate, usually it cannot be joined in the arbitration. A tribunal generally does not have the right to consolidate similar claims of different parties, even if it would be more efficient for all concerned to do so. Finally, it could be viewed as a disadvantage that the pool of experienced international arbitrators lacks both gender and ethnic diversity. Although some institutions and a few individual members of this group have made efforts to broaden that pool, on the whole there has been little change.
Source: The Principles and Practices of International Commercial Arbitration
Author(s): Margaret L. Moses