Arbitration is becoming a more prevalent choice in resolving many disputes around the world. With technology making great strides in modernizing processes, one would wonder what could be the difference between traditional and digital arbitration.
Let’s take a deeper look into the key differences between traditional and digital arbitration and what are the benefits and challenges of using either of the two.
The most obvious difference between traditional and digital arbitration is their mode of operation. Traditional arbitration is conducted through real-time hearings with most of the documents in physical format. Because of its straightforward approach, traditional arbitration is often considered the simpler option.
On the other hand, digital arbitration is often done through tech-enabled platforms (though not necessarily). Technology is used so that parties, counsels, and arbitrators could submit documents, attend virtual hearings, and draft the award.
Another key difference between the two is their business model. Since traditional arbitration bodies require physical appearance and coordination, most of them have offices where they could meet clients and do business. This could affect the cost of operations of the arbitration chamber.
Digital arbitration needs little to no physical office space — probably aside from the desk that the arbitrator would need to conduct their business. The only infrastructure needed for digital arbitration is the platform upon which the proceedings will be conducted and managed, and a laptop to access the platform.
Accessibility is also another differentiating factor between traditional and digital arbitration. Since traditional arbitration has existed far longer than digital arbitration, there are already many reputable organizations that operate with this method. To an extent, this makes traditional arbitration more visible. However, given the need for physical presence, it becomes less accessible compared to digital arbitration.
With digital arbitration, parties, counsels, and even the arbitrator themselves could come from different parts of the world and still conduct business. This ability to open arbitration to more people is one of the reasons why the pool of practitioners in this field is growing.
Traditional Arbitration: Benefits & Challenges
Many technocrats view traditional arbitration as an obsolete method. However, there are many benefits to traditional arbitration which still makes it the leading choice versus digital.
One of these benefits is reputation and availability. Traditional arbitration is still the standard upon which digital arbitration derives its processes. As the longer-running method, it’s natural for participants to rely on and trust traditional arbitration more. And since it has existed longer, there are many traditional arbitration chambers that are present and visible in the market.
This level of trust could be attributed to the human touch that traditional arbitration offers. When a reluctant party who was coerced into going with digital arbitration loses, a lot of problems may arise. They may argue that they weren’t able to present their case adequately, because they were forced into a virtual hearing. This is a problem that would not be encountered through traditional arbitration. We’ve spoken to arbitration experts and they agree that although digital arbitration is the future, the human side of a proceeding is a must in order to conduct an effective arbitration.
However, the criticisms of traditional arbitration aren’t unfounded. Generally, traditional arbitration can often be riddled with less efficient processes and more costly operations. Since physical presence is needed, it often requires a lot of time to collate all documents needed, read through them, and conduct hearings. For international cases, participants are made to fly from location to location which does not only cost money but time as well.
Poor document management could be one of the culprits of its inefficiency. With traditional arbitration, having rooms and rooms of binders is sometimes the way to manage documents, which makes discerning relevant information difficult. Some traditional arbitration cases also produce enormous amounts of documents with no standard naming convention which makes it a mess.
Digital Arbitration: Benefits & Challenges
Traditional arbitration’s biggest weakness is digital arbitration’s #1 strength — efficiency. With technology at play, processes are simplified, accelerated, and even automated.
This is very apparent in how digital arbitration handles and manages documents. With the power of technology, a relevant document is just one CTRL+F away, and if the document is also in a digital format, even specific sections could be easily found.
The benefit of an automated and tech-enabled management system creates an environment of freedom for all participants. Digital arbitration can be done anywhere as long as it has access to the internet, which gives parties, counsels, and arbitrators more time to do more things. With its wide reach, digital arbitration also promotes diversity and accessibility.
With all of these benefits rolled up, it’s clear that the most exciting benefit of digital arbitration is future-proofing. The world is heading towards digitalization and the legal industry is no exception. Digital arbitration provides law practitioners the avenue to be ready for a more globalized commercial market.
As exciting as digital arbitration is, it also faces a couple of challenges. One of which is the cyber security concerns of skeptics. Despite bank-grade encryption and other security measures, many still question the level of safety that digital arbitration can offer. Since digital arbitration is mediated through tech platforms, many are concerned about the security of the documents and procedures. This is important because arbitration is primarily used for commercial disputes wherein trade secrets may be involved.
Another challenge of digital arbitration is its high start-up cost. This is mainly due to the infrastructure that has to be set in place. Tech platforms take time and money to build, which may be an issue for firms who are looking into digital transformation for their arbitration processes.
Whether traditional or digital, arbitration is here to help provide better access to justice to people around the world. Technology has a long way to go and traditional processes still need polishing. It can be argued that these two are not polar opposites, but complementary methods to aid in delivering justice.
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