Arbitration Risks—Outcome Risk
Introduction
Our last segment of our B-2-B arbitration series (here) wrapped up discussion of the structural characteristics of arbitration agreements. Now that we’ve covered the nature and purpose of arbitration, and the structure of arbitration agreements, let’s consider some of the risks an agreement to arbitration can pose to a small or medium-sized business.
For simplicity’s sake we’ll focus on five types of risk associated with agreeing to arbitrate disputes:
- “Outcome risk;”
- “Fail-Safe risk;”
- “Bleak House risk;”
- “Counterparty risk;” and
- “Integrity risk.”
These are not necessarily the only types of risk one assumes in arbitration, but they are among the more significant ones. There are ways to help hedge against these risks and perhaps even lessen the frequency and severity of their manifestation, but for present purposes, let’s briefly discuss each, starting with outcome risk. Continue Reading »
