Answer

Cost-Benefit Analysis of Arbitration

            A contract is an agreement between two or more parties binding them to an obligation or promise that has to be achieved. Nonetheless, one of the parties in the agreement may go against his or her obligations leading to unfair treatment of the other party. In this case, the offended party can either report in a court of law and have the court decide on the outcome or seek arbitration to solve the dispute. Arbitration demands that the case or dispute is solved outside the court and can therefore be included in a contract as part of the conflict resolution options. Although arbitration as a dispute resolution method helps to solve the disputes faster, allows flexibility depending on the availability of the parties, helps to protect the image of participating parties and allows the conflicting parties to engage technical arbitrators for fair resolutions, the process cannot be appealed and may be relatively expensive compared to litigation (Bühring-Uhle, Kirchhoff  & Scherer, 2006).

            According to Public Citizen as quoted by Stim (2015), a non-profit advocacy group in the United States, the cost of arbitration is relatively high as a case making claims of about $80,000 has to pay an average initiation fee of $9,000. Since our firm seeks to get into contracts worth over $1 million, the initiation fee may be as higher than the $9,000. Including the cost of administration, paying the lawyer and that for the arbitrator, this costs will go beyond $9,000. Despite the cost of a court case being about $250 dollars, our firm will have to incur extra coasts in travelling to Malaysia or UK if the case is filed in these states. The company image will also be at risk if the firm were to pursue the court case. For this reason, an arbitration held in the US will be affordable to the firm as the firm will only have to pay or refund for the initiation fee, the arbitration process can also be handled through paperwork where the Malaysian and UK partners may not have to travel to the US and lastly, eliminates the extra charges of conducting the arbitration in partner countries since they have extra charges like the cost of premises in Malaysia.