Private arbitration systems resolve disputes without public accountability.

Evidence

First, if the nonmember knows he is in the wrong, yet the parties are unable to agree on a settlement, then having a neutral third party assess a penalty should enable him to minimize the reputation cost of his breach since arbitration awards are kept secret if the judgment is paid promptly. Although the arbitration’s results sometimes become known through gossip, as long as the individual is not frequently involved in such controversies, the damage to his reputation is likely to be contained. Second, if the nonmember thinks he is in the right, arbitration is preferable to litigation because it is cheaper, faster, and subjects the member to unqiue pressures to pay promptly. — Lisa Bernestein, Opting out of the Legal System, 81 (#expands, via linked claim)

A few years ago a case arose that revived the debate over the secrecy of judgments in the New York bourse. The Yehuda treatment is a way of altering a stone such that its flaws become invisible to the human eye unaided by special technology. The firm that developed this process and actually treats the stones requires those they deal with to sign an agreement requiring disclosure of the stone’s treatment to any potential buyers. Soon after the treatment was introduced, but before it was widely known, a dealer sold a treated stone without disclosing the treatment. The buyer subsequently discovered the treatment and filed a claim against the seller. The seller defended on the grounds that he did not know or have reason to believe that the stone had been so treated. The board of arbitrators ordered recision of the deal and imposed a very small fine on the seller. One arbitrator wanted to write an opinion explaining that the only reason the judgment was so small was that the treatment was new and a dealer in exercise of ordinary care would not have been expected to ask whether or not the stone had undergone this treatment. By the time the arbitration was concluded, however, the treatment had become so well known that a similar defense of ordinary care would not prevail in the future and the arbitrators intended to impose extremely heavy fines in subsequent cases. — Lisa Bernestein, Opting out of the Legal System, 248 (#expands, via linked claim)

Categorization

• XREF: connects to: Private arbitration can effectively substitute for courts — Lisa Bernestein, Opting out of the Legal System, 40; Private arbitration outcomes affect market behavior even without published precedent — Lisa Bernestein, Opting out of the Legal System, 248; Private dispute resolution excels through speed, low cost, and secrecy. (+12 more)

Related

• Arbitration’s secrecy lets wrongdoers minimize reputation costs while right-holders gain speed and cheapness. (similarity 0.91)
• Arbitration secrecy hides disputes from public view once judgments are paid (similarity 0.89)
• Private arbitration outcomes affect market behavior even without published precedent (similarity 0.89)
• Private arbitration beats courts on speed, cost, and secrecy. (similarity 0.86)
• Private arbitration can impose punitive damages to deter breach where courts cannot. (similarity 0.85)
• Private dispute resolution excels through speed, low cost, and secrecy. (similarity 0.84)
• Secrecy of awards lets wrongdoers contain reputational damage from breach. (similarity 0.84)
• Secrecy of arbitral disputes preserves a party’s creditworthiness and reputation. (similarity 0.84)
• Private arbitration can effectively substitute for courts (similarity 0.83)
• Publicizing arbitration awards would destroy the informal flexibility that makes the system work. (similarity 0.82)

Broader Connections

• Arbitration’s secrecy lets wrongdoers minimize reputation costs while right-holders gain speed and cheapness. #expands (0.85) — Lisa Bernestein, Opting out of the Legal System, 81
• Private arbitration outcomes affect market behavior even without published precedent #expands (0.82) — Lisa Bernestein, Opting out of the Legal System, 248
• Private dispute resolution excels through speed, low cost, and secrecy. #qualifies (0.75)
• Settlement terms can be engineered to publicly obscure a defendant’s guilt #exemplifies (0.70) — Jonathan Harr, A Civil Action, 2600