Parties agree to mandatory arbitration for various reasons. These may include a desire for a rapid decision, avoidance of appeals, relaxed rules of evidence, opportunity to select the arbitrator, reduced costs and confidentiality.
When settlors are preparing trusts, however, other factors may heighten these motivations to arbitrate rather than to litigate. The settlor may seek to create a less contentious relationship among members of a family or business, to avoid costly litigation that will reduce the assets of a family trust, or to shield from public view confidential matters such as personal family activities and the financial status of family members or other parties. Plus, the settlor may want to have relaxed rules of evidence that typically apply in arbitration proceedings so the arbitrator can consider otherwise inadmissible (in court) evidence relating to past practices, traditions or understandings of family members or other parties.