Is third-part arbitration able to resolve disputes, repair relationships and empower consumers?

What is it about?

Governments, firms, and consumer agencies promote third-party arbitration to end consumer–firm disputes that arise from dissatisfying services and failed service recoveries in the hope that third-party arbitration will (1) resolve the dispute, (2) repair the relationship with the service provider, and (3) empower the consumer. Literature, however, doubts these positive expectations because arbitration uses an adversarial intervention mode and does not allow consumer control of process and outcome. The results of a field experiment in the context of the Dutch Foundation forDisputes Committees diminish some of the doubts raised about arbitration: (1) complainants are more committed to the decision after the hearing, even though they are less convinced the decision is going to be in their favor, (2) complainants remain intent on never visiting the service provider again, but (3) complainants feel more in control, even though they have ceded control to the third party.

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Why is it important?

In complex societies, disputes and conflicts between consumers on the one hand, and public or private organizations on the other hand, are common and inevitable. Disputes arise between consumers and service providers (after a dissatisfying service or a failed service recovery), between citizens and governmental agencies (after a refused building permit), or between patients and health care providers (after medical maltreatment). Eventually, consumers may turn to third parties like the American Arbitrators Association, the Arbitration Foundation of Southern Africa, the Institute of Arbitrators and Mediators Australia, or the Geschillencommissie (Netherlands) who offer arbitrational services to resolve the dispute. The number of consumers who turn to (not-for-profit or commercial) third-party arbitrators to intervene in a conflict with private or public organizations is increasing. Arbitration has risen as the preferred method of managing legal claims in banking and finance (Hanefeld 2013), employment and labor relations (Berry 2012), medical malpractice (Gilles 2013), and consumer affairs (Green 2010) in places as diverse as Korea (Bae and Lee 2012), United States (Higginbotham 2010), Tanzania (Cosmas 2014), India (Sharma and Agarwal 2010), Asia (Maniruzzaman 2002), and Africa (Onyema 2008). This expansion of third-party arbitration is one of the most important trends in modern law (Stempel 2008). It is important to find out whether it is effective.

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