Arbitration is an alternative to a trial in which parties are assisted by an unbiased third-party mediator in an informal setting. After each party presents its side to the argument, the mediator makes a decision.
Conciliation is a similar alternative differing from arbitration in that parties meet with the mediator separately instead of in the same room.
The conciliation process is geared towards encouraging parties to enter into settlement agreements on their own without much intervention by the mediator. In the event conciliation does not work, parties are free to continue to the state or federal court system. Disadvantages to these methods of alternative dispute resolution include no access to the judicial system, questions over the mediator's bias or competency and no discovery phase in which to uncover evidence.
One of the greatest disadvantages to arbitration or conciliation is that parties do not have access to the state or federal court systems as they seek to resolve their claims. During arbitration or conciliation, there is no access to a jury or the official rules of evidence.
Formalities inherent in the judicial system are not present in an alternative dispute setting and the arbiter is free to conduct the proceedings any way he sees fit.
Hearsay evidence may or may not be admitted and the right to appeal is abolished in nearly all alternative dispute settings. Arbitration may lead to forced compromise or splitting the disputed amount in an arbitrary way as opposed to a court of law which will either award the plaintiff what he asks for or nothing at all.
Another disadvantage of arbitration or conciliation concerns questions over the qualifications and potential biases of the mediator. In a court of law, all parties know the judge received a formal legal education and served many years as an attorney before taking the bench. However, training to become a mediator is much less intense than law school and usually involves some sort of qualification training.
Parties are not reassured as to any potential biases of an arbiter, as opposed to state and federal judges who are under a legal requirement to recuse themselves in any event of personal knowledge of the case. Arbiters are under no duty to expedite the process and may take virtually unlimited time conducting the meetings at the expense of the parties. Lastly, arbiters make decisions based upon personal notions of justice, often not based upon law or statutes.
In a court of law parties are entitled to an extensive discovery phase.
Each side is entitled to all evidence to be used by the other side in preparation for the case. The only exclusion to this rule is evidence covered by the attorney-client privilege. In an alternative dispute resolution, no discovery phase is permitted and parties enter the discussion with no knowledge of the opposing side's evidence or proposed argument. One side may present a particularly devastating piece of evidence and the other party will have no time to prepare a rebuttal.
In certain situations, alternative dispute resolution may appear nearly impossible for some parties as their conflict is acrimonious they might never reach a solution. The arbiter or conciliator must remain with the parties until a solution is reached, which could takes weeks or even months. Parties are free to hold to their bottom lines and many are not eager to negotiate or reach any sort of conclusion. In some instances, arbitration is not binding on parties so disgruntled individuals end up commencing a lawsuit after, causing increased costs for both sides.