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Arbitration vs Litigation: What Is The Difference Between Litigation & Arbitration In Law?

What is the difference between arbitration and litigation?

Arbitration vs litigationThe two most common ways to settle a lawsuit are through litigation or arbitration. Litigation is the legal procedure to settle a dispute using the court system in accordance with a specific set of laws, rules, and statutes.

In the traditional litigation process, the case is presented before a judge or jury, who ultimately makes a decision after reviewing all evidence and hearing from all witnesses. 

Unlike litigation, the arbitration process is not held in court. Both parties agree on the rules that govern the settlement and what evidence and witnesses to consider. Instead of a judge, in arbitration, an arbitrator (or arbitrators) will be designated as the agreed-upon third party that will settle the case. 

What is arbitration in law?

The logical next question is, what is legal arbitration

Arbitration in law involves using an arbitration service like Judicial Arbitration and Mediation Services, the American Arbitration Association (ADR), or American Health Law Association to facilitate arbitration proceedings. They have arbitrators for specific industries, so you would be appointed an arbitrator with relevant professional knowledge. 

The decision made by the neutral third-party arbitrator is legally binding. Except in extreme circumstances, an arbitration decision cannot be appealed

Arbitration vs litigation comparison

Use case/situationArbitrationLitigationBest option
CostFees for arbitration servicesPre-trial discovery feesGenerally arbitration but depends on the nature of the dispute
PrivacyPrivatePublicArbitration
TimeFasterSlowerArbitration
Industry insightYes, industry professionalNo, judge or JuryArbitration may help make a better decision because arbitrators will have more knowledge about the industry
Option to appealNot likelyYesLitigation, in case the lawsuit needs to be reviewed again
Autonomy of evidence & witnessesYes, ability to choose relevant evidence and witnessesNo, all evidence and witnesses called into questionDepends on the nature of the dispute

Advantages & disadvantages of arbitration over litigation

Arbitration prosArbitration cons
QuickAppeals highly unlikely
PrivateInformal
Agreed upon third-party arbitratorRequires both parties’ participation

Arbitration advantages

1. Arbitration is Private

If the details of the lawsuit are better kept confidential, arbitration is the better route. 

No one outside of the arbitration hearings has to know about the arbitrator’s decisions or what was discussed.

2. Evidence Autonomy

In arbitration proceedings, not all evidence has to be used for consideration. Both parties are able to decide on what evidence they would like to include for making a decision. 

Evidence that may have been required to disclose in litigation can be left out in arbitration if all parties agree it is not relevant.

3. Quicker Process

Once arbitration is agreed upon, both parties decide on a schedule to plan out the meetings. Litigation requires you to add your case to a crowded docket which can take time to get through. Being able to set the schedule for arbitration hearings reduces delays in settling the dispute. 

4. Decision Made by Industry Professionals

If the nature of the dispute is technical and requires context, arbitration ensures you have an industry professional working on your case. Miscommunications and misinterpretations are minimized when an industry professional hears the case. The arbitration award will likely be one that is more relevant and equitable for resolving the dispute.

5. Can be Less Expensive

Because arbitration is done on a schedule designated by the parties involved, it can be less expensive than litigation, which the courts can draw out. It’s essential to keep in mind that the arbitration service providers in the US charge a fee for conducting the arbitration at their discretion. Also, in some cases, arbitration can be more expensive than litigation but typically isn’t. 

6. Including an Arbitration Clause

Creating a contract that includes an arbitration clause means that both parties agree not to take any disputes to court and settle them through arbitration instead. 

Arbitration allows for more flexibility as an alternative dispute resolutionBinding arbitration means that both parties give up the right to settle the dispute in court when they enter into a contract with each other. Whatever decision the arbitrator makes is final and legally binding.

Using an arbitration clause can also protect a company from frivolous or public lawsuits.

Arbitration disadvantages

1. Cannot Appeal Decision

Once arbitrators have made a decision about a case, it cannot be appealed except in extenuating circumstances. If either party feels that the decision is unfair, the likelihood of it being reversed is low in an arbitration

2. Informality of Decision Making Process

Unlike in court litigationarbitration does not necessarily abide by governing laws. In this case, the arbitration decision may not fully exercise the extent of the law. 

3. Requires Mutual Agreement

Arbitration requires a disclaimer that both parties forfeit their rights to a court trial. If an arbitration agreement wasn’t included in a signed contract, one party may refuse an arbitration, forcing the case to go to court.

Advantages & disadvantages of litigation over arbitration

To make a decision when considering arbitration vs court, take a look at the advantages and disadvantages of litigation

Litigation prosLitigation cons
Adhere to Rules of Evidence and Rules of ProcedureTime Consuming & expensive
Does not require mutual agreement
Appeals
Judge is decision-maker
Court proceedings made public

Litigation advantages

1. Adherence to Laws and Regulations

In litigation, the courts have to adhere to the Rules of Evidence and Rules of Procedure. When the laws have clearly been broken and justification is needed, litigation is a reliable option. 

In litigation, all evidence is brought into consideration along with witnesses. This process ensures a legal and equitable decision. 

2. Both Parties Do Not Have to Agree

If you cannot come to an agreement with the other party to settle a dispute, you can legally require a trial. The other party does not have to agree to go to court for a decision to be made. 

3. Option to Appeal

Appeals are a safety net for when an error is conducted in the court proceedings. Having the option to appeal can ensure that the decision was lawful and just. 

Litigation disadvantages

1. Can Be Time Consuming

The litigation process is dependent on the court systems to address their issues. Before appearing in court, you will likely have to go through a mediation process to work towards a court decision. The process can get drawn out, costing time and money. 

2. More Expensive

The pre-trial discovery process is expensive and is one of the most costly aspects of doing litigation. It’s the process of gathering all the evidence needed to go to trial, including depositions from witnesses. This step isn’t as necessary or time-consuming in arbitration.   

3. Judge or Jury are the Ultimate Decision-Maker

Courts appoint a judge or a jury to make a ruling on your case. It’s not likely that they will have in-depth professional knowledge about the industry, which may hinder their understanding and ability to rule as effectively as an arbitrator

4. Court Proceedings are Public

All court proceedings are made available to the public. Anyone can access this information. Litigation could put a brand or company at risk of public scrutiny.

Need help with arbitration or litigation?

The choice between arbitration vs litigation depends on the needs surrounding a settlement. Whether you’re unsure which option to chose or you know which direction you’re headed, call Cueto Law Group. We specialize in Business Law and have a diverse team of international attorneys ready to assist you.

FAQs

Is arbitration litigation?

No. Arbitration and litigation are both means of resolving a dispute. However, arbitration is done outside of the courtroom while litigation takes place inside of a courtroom. Both are legally binding. Arbitration allows for more autonomy in the decision-making process than litigation. Litigation is strictly upheld by the court system.

Can you go to court after arbitration?

It depends on the circumstances. If both parties agree that the arbitration decision is binding, the case can only be brought to court in extenuating circumstances through an appeal. If the parties agree that the decision is non-binding and both parties do not agree on the final resolution, it can then be taken to court for settlement.

What is the difference between mediation and arbitration?

Mediation is a process where both parties work to agree on the terms of the settlement before appearing in court. In most cases, it is court-mandated.
Mediation is used when two parties are settling a dispute through litigation.
Arbitration takes place completely separate from the courtroom.

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Cueto Law Group, P.L.

Based out of Miami, Cueto Law Group offers an extensive range of legal and business counsel to individuals, entrepreneurs, and corporations.

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