Washington commercial arbitration offers business owners an alternative to traditional litigation for resolving contract disputes, with advantages including confidentiality, streamlined procedures, and knowledgeable decision-makers, but also limitations on discovery, appeals, and multi-party dispute resolution.
Whether arbitration serves your business interests depends on your dispute's complexity, the relationship you want to preserve, cost considerations, and whether your contract already contains an arbitration clause that may compel you to arbitrate regardless of preference.
Bridges Dispute Resolution provides neutral arbitration services for commercial disputes throughout Washington State. Contact us to discuss arbitration options for your business dispute.
Key Takeaways About Washington Commercial Arbitration
- Washington's Uniform Arbitration Act governs commercial arbitration and provides mechanisms to compel arbitration, confirm awards as judgments, and vacate awards only on narrow grounds like fraud or arbitrator misconduct
- Arbitration typically costs less and resolves faster than litigation but offers limited discovery, minimal appeal rights, and confidential proceedings that prevent establishing public legal precedent
- Arbitration clauses in business contracts are generally enforceable in Washington, and parties who signed contracts containing these clauses typically must arbitrate disputes rather than litigate in court
How Washington Commercial Arbitration Works
Washington commercial arbitration follows procedures established by the parties' arbitration agreement and the selected arbitration provider's rules. Most business arbitrations in Washington proceed under American Arbitration Association (AAA) Commercial Arbitration Rules or JAMS Comprehensive Arbitration Rules & Procedures.
The arbitration process typically begins when one party files a demand for arbitration with the chosen provider, describing the dispute and the relief sought. The parties then select a neutral arbitrator (or panel of arbitrators) with relevant business or legal knowledge.
Discovery in arbitration is generally more limited than litigation. While parties can request documents and take depositions, Washington commercial arbitration typically restricts discovery to information directly relevant to the disputed issues, thereby reducing costs but sometimes limiting parties' ability to fully investigate their claims.
The arbitration hearing resembles a trial but with relaxed evidentiary rules. Parties present evidence, examine witnesses, and make legal arguments before the arbitrator. After the hearing, the arbitrator issues a binding arbitration award that resolves the dispute.
Advantages of Arbitration for Business Contract Disputes
Washington business arbitration offers several benefits that make it attractive for certain commercial disputes.
Confidentiality
Arbitration proceedings are generally private and often confidential, unlike public court cases, where filings, hearings, and judgments become part of the public record. Businesses concerned about protecting trade secrets, sensitive financial information, or customer relationships often prefer arbitration's confidentiality over litigation's public exposure.
Speed and Efficiency
Commercial arbitration typically resolves faster than litigation. Court dockets in King County Superior Court and other Washington jurisdictions may delay trials. Arbitration hearings often occur within much shorter timeframes, and streamlined procedures eliminate many pretrial motions that consume time in litigation.
Informed Decision-Makers
Parties may select arbitrators with specific knowledge in construction law, technology contracts, franchise disputes, or other specialized areas of business. This often leads to more informed decisions than generalist judges might reach, particularly in disputes involving technical or industry-specific issues.
Reduced Costs
Arbitration generally costs less than full litigation, though the difference varies significantly based on dispute complexity. Limited discovery, shorter timelines, and streamlined procedures reduce attorney fees. However, parties pay arbitrator fees and administrative costs that don't exist in court, and complex arbitrations can still generate substantial expenses.
Finality
Arbitration awards are binding and final with very limited appeal rights. While this finality can be disadvantageous if you lose, it also prevents the opposing party from extending disputes through multiple appeals that delay resolution and increase costs.
Disadvantages and Limitations of Commercial Arbitration
Washington commercial arbitration also presents significant drawbacks that make litigation preferable for certain business disputes.
Limited Discovery
Restricted discovery in arbitration may prevent you from obtaining evidence needed to prove your case. Businesses facing disputes where they suspect document destruction, need extensive third-party discovery, or must reconstruct complex transactions may find arbitration's discovery limits problematic.
Minimal Appeal Rights
Washington law provides very limited grounds to vacate arbitration awards under RCW 7.04A.230. Courts may vacate awards only for corruption, fraud, arbitrator misconduct, or when arbitrators exceed their powers.
Even if the arbitrator made legal errors or factual mistakes, Washington courts generally cannot overturn arbitration awards based on these errors.
Multi-Party Complications
Arbitration works best for two-party disputes. Business conflicts involving multiple parties (subcontractors, vendors, insurers, and principals) become complicated in arbitration. You cannot force non-parties to arbitrate, and coordinating multiple related arbitrations is often inefficient and expensive.
No Precedent
Arbitration awards don't create binding legal precedent. If your business dispute involves important legal questions affecting future operations or industry standards, litigation that produces published court opinions may serve your interests better than private arbitration that resolves only the immediate dispute.
Cost Uncertainty
While arbitration often costs less than litigation, complex commercial arbitrations can become expensive. AAA and JAMS filing fees for commercial cases vary based on claim amounts and arbitrators fees can vary depending on the arbitrator’s experience and the time it takes. Parties split these costs equally unless the arbitration agreement provides otherwise.
Enforcing Arbitration Clauses in Washington
Washington courts generally enforce arbitration clauses in business contracts under both Washington's Uniform Arbitration Act and the Federal Arbitration Act. If your contract contains an arbitration clause, you typically must arbitrate covered disputes rather than file lawsuits.
When one party files a court case despite an arbitration agreement, the other party may file a motion to compel arbitration under RCW 7.04A.070. Washington courts will stay the litigation and order arbitration unless the arbitration agreement is invalid, unconscionable, or doesn't cover the dispute.
Defenses to arbitration enforcement include:
- Lack of mutual assent (the party didn't actually agree to arbitrate)
- Unconscionability (the arbitration terms are fundamentally unfair)
- Fraud in the inducement of the arbitration agreement itself
- The dispute falls outside the arbitration clause's scope
Washington courts apply contract law principles when evaluating arbitration agreement enforceability but generally favor arbitration when contracts contain clear arbitration provisions.
Confirming and Enforcing Arbitration Awards
After an arbitrator issues an award, the prevailing party typically seeks to confirm the award as a court judgment. This confirmation converts the arbitration award into an enforceable judgment with the same effect as any court judgment, allowing use of collection remedies like garnishment and liens.
The losing party has 90 days to seek to vacate the award on limited grounds including corruption, fraud, arbitrator misconduct, or arbitrators exceeding their authority. Washington courts rarely vacate arbitration awards, and parties challenging awards face a heavy burden proving grounds for vacatur exist.
When to Choose Arbitration for Your Business Dispute
Arbitration works well for Washington business contract disputes involving:
- Two-party disputes where both parties agreed to arbitrate
- Cases requiring confidentiality to protect sensitive business information
- Disputes where specific knowledge benefits decision-making
- Situations where preserving ongoing business relationships matters
- Cases where limited discovery adequately supports both sides' claims
Consider litigation instead when your dispute involves:
- Multiple parties requiring coordinated resolution
- Need for extensive discovery to prove claims or defenses
- Legal questions where you want published precedent
- Emergency injunctive relief that arbitration cannot provide quickly
- One-sided arbitration clauses with unconscionable terms
FAQ About Washington Business Arbitration
What Should an Arbitration Clause Include?
Effective arbitration clauses specify the arbitration rules (AAA or JAMS), the number of arbitrators, how arbitrators are selected, the arbitration seat or venue, cost allocation, discovery limits, and any carve-outs for emergency injunctive relief. Clear arbitration provisions prevent disputes about arbitration procedures themselves and ensure enforceability under Washington law.
Can I Use Arbitration If My Business Contract Doesn't Have an Arbitration Clause?
Yes, parties can agree to arbitrate disputes even without a pre-existing arbitration clause in their contract. After a dispute arises, both parties may sign a separate arbitration agreement choosing to resolve the conflict through arbitration rather than litigation. This post-dispute arbitration agreement must clearly identify the dispute, specify arbitration procedures, and demonstrate mutual consent from both parties to proceed with arbitration.
What Happens If the Other Party Ignores the Arbitration Award?
If a party refuses to comply with an arbitration award, the prevailing party files a motion to confirm the award under RCW 7.04A.220, converting it into an enforceable court judgment. Once confirmed as a judgment, the award becomes enforceable through standard collection remedies, including wage garnishment, bank account levies, liens on real property, and seizure of business assets. Washington courts treat confirmed arbitration awards identically to judgments entered after trials, giving them full legal force.
What Is the Federal Arbitration Act (FAA), and How Does It Affect My Washington Contract?
The Federal Arbitration Act (FAA) strongly favors the enforcement of arbitration agreements in contracts involving interstate commerce, which often includes most business disputes. When the FAA governs a dispute, federal law preempts contradictory state laws and reinforces the binding nature of the arbitration clause.
How Does Commercial Arbitration Differ From Mediation?
Arbitration and mediation are both forms of alternative dispute resolution (ADR), but they function differently.
- In arbitration, a neutral third-party arbitrator hears evidence and legal arguments from both sides, then issues a final, binding decision called an award.
- In mediation, a neutral mediator facilitates negotiations between the parties, helping them find a mutually acceptable, voluntary settlement. The mediator does not issue a decision or force the parties to agree.
What Is Emergency Injunctive Relief, and Can I Get It in Arbitration?
Emergency injunctive relief is a court order, such as a Temporary Restraining Order (TRO) or preliminary injunction, that immediately compels a party to take or stop a specific action to prevent irreparable harm.
While arbitration generally offers a faster path to a final resolution, the process is usually not immediate enough for true emergencies.
Many arbitration clauses carve out the ability to seek emergency relief directly from a court, as arbitration rules typically allow only limited emergency measures, which often take longer than a court action.
Evaluating Your Dispute Resolution Options
Deciding whether arbitration serves your business interests requires careful analysis of your specific dispute, contractual obligations, budget constraints, and strategic goals. While arbitration offers significant advantages for many commercial conflicts, litigation or mediation may better protect your business in other situations.
Bridges Dispute Resolution provides neutral arbitration services for commercial disputes in Seattle, Tacoma, and across Western Washington. Our experienced arbitrators bring decades of business and legal experience to contract disputes, partnership disagreements, vendor conflicts, and other commercial matters, helping parties reach fair, enforceable resolutions efficiently.