What is the problem with the arbitration clause? In theory, there is nothing wrong with arbitration. Instead of using the courts with a jurist or jury who knows nothing about your business, you enlist people for the arbitration panel who are well versed in the norms of the business. They will apply the procedural rules of law in a less rigid manner than the courts. It is supposed to be faster.

While there has been a good deal of litigation concerning arbitration, most litigation has been whether the controversy is subject to arbitration or were the arbitrators so far off base as to the law or facts that the arbitration decision should be thrown out. The problem is that, since almost all reinsurance agreements have an arbitration clause in them and the rationale for the arbitration decisions are not published, the body of reinsurance law is growing much more slowly than for insurance law.

Since many of the clauses the businesses to which they relate are similar, a party could arbitrate the same issues more than once and come out with both positive and negative results even when the same law is being applied. While this can also happen at a trial court level if the agreement were to lack an arbitration clause, the parties would at least have ability to appeal the decision. The results of the appeal would at least provide some certainty for that jurisdiction and maybe guidance in others.