5 differences between litigation and arbitration

Cost

The recent rise in popularity of arbitration as a method of dispute-settlement has led to an increase in the cost incurred in an arbitration proceeding. Despite this trend, in general, litigation remains, generally, more expensive than arbitration. One of the reasons is that the costly pre-trial discovery process or costs incurred by witnesses’ depositions are not present in arbitration proceedings.

Duration

An arbitration proceeding is generally faster than a court lawsuit.

A key reason for this is the lack of an appeal procedure in arbitration. Decisions made by judges in litigation are generally appealable to a higher court. Therefore, a court case is appealed to a higher court, this generally adds extra time to the dispute-resolution process. In contract, arbitration awards are not subject to appeal, where the decision rendered by the arbitrators is final and binding upon the parties.

The time-efficiency of arbitration is also owned to the recent development of the fast-track procedure. For example, under the rules of the American Arbitration Association (AAA), a construction arbitration involving claims of $75,000 or less can be handled as a “fast track” proceeding, where the hearing occurs within 45 days after the case is filed, and a decision is rendered no more than 14 days after the hearing is completed.

Flexibility

Nowadays, arbitration is more and more opted for as a method of dispute settlement given its flexibility compared to traditional litigation.

Unlike negotiation, in both arbitration and litigation, the dispute is settled by a decision maker, rather than the parties themselves. However, there are significant differences between the two procedures regarding the appointment of the decision-maker. In the arbitration procedure, the parties are allowed to designate the decision-maker or decision-makers who settle(s) their dispute. In litigation, on the other hand, the decision maker is usually a judge assigned to hear the case.

The second feature that contributes to the flexibility of arbitration is the ability of parties to choose the law governing the proceedings, as well as the place of arbitration. For example, two parties could be subject to arbitration under ICC Rules with the seat of arbitration in Bucharest.

Confidentiality

A key reason for the increasing popularity of arbitration is owned to the confidentiality of the process. While in litigation, submissions, docket entries and evidence is normally open to the public, the arbitration process is a confidential one, making it an attractive dispute-resolution method particularly for clients which aim to protect their financial details are involved. Similarly, firms may prefer confidentiality as well where the allegations include embarrassing mistakes, trade secrets, or simply to avoid a public dispute that could lead to distrust or an erosion of confidence in the firm if it were made public.

Expertise

The role of an arbitrator is similar to that of a judge in a litigation. Both of them act as an independent third party who carefully considers and analyses the evidence presented by the parties, drawing on knowledge of relevant laws and policies in order to weigh up each party’s case and make a resulting ruling.

But unlike a judge, who normally hears cases of a general nature, arbitrators are generally selected from a pool of professionals with experience in the specific industry the subject-matter of the dispute belongs to (e.g, construction lawyers serve as arbitrators to resolve construction disputes).

Andra Curutiu

Legal Intern R&R Partners Bucharest

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