Even if you were watching the Supreme Court closely last week, you might have missed another 5-to-4 decision, and this one has important consequences for fnancial institutions and their customers.

In Green Tree Financial Corp. v. Randolph, the court was asked to allocate the burdens of enforcing an arbitration clause in a financial services contract. In response, a majority - indeed, the same five justices whose ruling decided the presidential election - found a reasonable middle ground.

The Green Tree decision gives consumers the right to immediately appeal orders that compel arbitration and dismiss their claims but also gives them the burden of proving that arbitration would be unfair.

This result is good for consumers and financial institutions alike. Arbitration of disputes is a quicker, cheaper, and less complicated alternative to litigation.

For banks, it is an extension of customer service, which aims to resolve problems without damaging the underlying relationship. For consumers, it is a forum in which they can be heard - without lawyers or waiting to get on a court docket - and get their dispute resolved by a neutral third party.

Though the Green Tree case posed procedural issues that only a lawyer could love, it was also a test of the long-standing federal policy favoring arbitration.

That policy dates from passage of the Federal Arbitration Act of 1925. In passing it Congress explicitly recognized that the pace and expense of the court system harmed consumers and businesses alike. Arbitration was hailed as an alternative that let people obtain redress without having to make a federal case (literally or otherwise) out of their complaint.

If courts were overcrowded and lawyers expensive in 1925, they can be outrageously so today. And in the past 75 years arbitration has fulfilled its promise of supplying an effective alternative to litigation.

Arbitration is faster. A study that compared employment claims filed with the American Arbitration Association with those filed in U.S. District Courts found that, on average, arbitration resolved cases in half the time of litigation.

Also, arbitration is less expensive. Someone can have a typical dispute with a financial services provider arbitrated for a fee of about $49, which is waived if the consumer is indigent and is usually refunded if the consumer prevails. The filing fee is all the expense that arbitration requires.

Arbitration is simple and informal enough that a person can pursue his or her claims without having to pay a lawyer to be a "shepherd" in the mazes of our court system. This is essential to most consumer disputes, which often involve simple factual issues and small amounts of money.

A report in the American Bar Association Journal said that most lawyers will not even take a case that is worth less than $20,000.

Most importantly, arbitration is fair. The leading arbitration forums take great pains to ensure that their arbitrators are qualified. The arbitrators are generally required to have 15 years of relevant experience. They are then subject to recusal-related procedures that mirror those governing federal judges, and the parties are permitted to dismiss an arbitrator who they suspect may be biased. When appropriate, the parties can conduct discovery and subpoena witnesses for hearings.

It is no surprise, therefore, that a recent study of securities arbitration indicated that well over 90% of the participants in arbitration believed their cases were handled fairly.

The Green Tree case had put the use of arbitration in jeopardy. A consumer who did not want to abide by an arbitration clause insisted that she could not afford the fees. Unfortunately, she did not make any real effort to ascertain what the fees would be, or whether they could be waived.

The U.S. District Court ruled that mere worries about costs were not enough to invalidate an arbitration clause, and it dismissed her case. However, she appealed, and the U.S. Court of Appeals for the 11th Circuit found that she not only had the right to such an immediate appeal (without having to go through arbitration first) but also that the risk of high fees alone was enough to void the clause.

Taken together, these rulings would have eroded the savings available from arbitration since they required that the party invoking the clause go to court and prove that arbitration was fair and then endure an appeal.

In overturning part of the appeals court's ruling, the Supreme Court struck a balance between the interest of consumers in being able to appeal real issues right away and the interest of financial institutions in being able to avoid sham grievances. Under the Green Tree ruling, someone who sues, only to be compelled to go to arbitration, is allowed to appeal this decision. But a consumer who claims that arbitration is unfair must prove it.

Recent months also have brought increased legislative consideration of arbitration and some efforts to prohibit its use in particular types of contracts.

The Green Tree decision points to a useful middle path for the continuation of those deliberations next year. It reminds us that arbitration is a win-win situation for financial institutions and consumers. (Lawyers don't make out so well, and that helps ensure that arbitration will become a political football.)

In the Green Tree case, the high court served the interests of financial institutions and consumers alike Congress and the financial services industry should now approach arbitration in a similar way, with the goal of ensuring both its fairness and its availability.

Mr. Mogilnicki is a partner in the Wilmer, Cutler and Pickering law firm. He filed an amicus brief in Green Tree v. Randolph on behalf of the American Bankers Association, the American Financial Services Association, and the Consumer Bankers Association.

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