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11 Key Differences Between Arbitration vs Litigation
Dealing with a legal dispute is never easy. By involving an expert dispute resolution solicitor early on, you stand the best chance of the right outcome. Options open to you include arbitration and litigation. We look at what arbitration and litigation are as well as 11 key differences.
Choosing the right process is important. Some disputes, such as business disputes, property disputes, and consumer claims are well-suited to arbitration, while others, such as personal injury are best-suited to litigation. In addition, there may be particular features to your disagreement which mean that one process will be more advantageous than the other.
Arbitration
Arbitration is a way of resolving a legal dispute outside of the court system, known as an alternative dispute resolution method. It involves both sides putting their case to an independent arbitrator who will hear the evidence and make a decision. The parties will agree on their choice of arbitrator together. Where necessary, someone with expertise in a particular sector can be chosen.
The arbitration process
The first stage is for both parties to agree that they will enter into arbitration and accept the arbitrator’s decision.
The next step is to choose an arbitrator. Research can be carried out to find someone with the right background and level of experience for your case. Both parties can suggest someone and negotiate to try and agree on the right arbitrator for their case. Where agreement cannot be reached, the Law Society can be asked to appoint an arbitrator or a neutral third party can make the decision.
Both parties will then enter into an arbitration agreement. This is their agreement to be bound by the results of the arbitration as well as details of how the process will be dealt with. This can include the steps to be followed, which arbitration rules will apply, where and how hearings will take place, which parties will attend hearings, and a timetable for issues such as disclosure of evidence and production of written submissions.
Once all evidence has been exchanged and written submissions made, hearings will commence. There could be one or more hearings, depending on the complexity of the case and the number of issues in contention.
The arbitrator will consider the evidence and make a binding award setting out what each party is required to do.
Litigation
Litigation is the process of taking a case to court. It is usually considered a last resort for several reasons, including the fact that it is often time-consuming and expensive. Courts prefer that parties resolve disputes between themselves wherever possible. Where genuine efforts are not made to do this, a party can be penalised when a ruling is made, including when the court decides who should pay the legal costs of the action.
The litigation process
In bringing a case in the courts of England and Wales, the pre-action protocol needs to be followed, as set out in the Civil Procedure Rules 1998. The protocol gives timescales for each step in the process.
Prior to the commencement of legal action, the parties will usually negotiate to try and resolve matters and the claimant will be expected to send a letter of claim giving details of the claim, the remedy they are seeking, and the key information in the case. Additional information can also be requested from the defendant.
The first stage is to issue proceedings by issuing a claim form together with the particulars of the claim. The defendant will then respond by acknowledging the claim and thereafter, a defence to the claim.
The first hearing or hearings will be for the court to give directions in respect of the case, such as what information must be disclosed and the deadlines for exchanging documents, including witness statements and experts’ reports.
It remains open to the parties to try to negotiate a settlement throughout the litigation process.
Following exchange of disclosure and service of witness statements, the parties will each prepare for trial.
At the trial, each party will be able to put their case and produce and cross-examine witnesses. The judge will consider the matter and usually issue a written judgment sometime after the trial, including an order as to payment of each side’s costs.
10 key differences between arbitration and litigation
1. Time taken
Arbitration is known for being considerably faster than litigation, particularly if the courts are experiencing a backlog in cases, which happens regularly. The length of time will depend on the complexity of the case, but it is often possible to reach a final hearing in arbitration well within a year.
Court cases can take considerably longer. There can also be more delays in litigation and hearings may be called off at the last minute if other hearings overrun or a judge is not available. Rescheduling a court hearing usually takes much longer than an arbitration hearing.
2. Flexibility vs formality
The arbitration process can be more flexible than litigation. The parties can decide where they want hearings to take place and have input into when these will be dealt with. They can also agree on the volume of written submissions, utilise technology as they wish for matters such as document storage and virtual hearings and decide on the number of conferences that will be held prior to the hearing.
While more flexibility is often an advantage, it can occasionally be frustrating if the other party takes longer than you would like to deal with issues such as disclosure of evidence and production of expert witness reports.
Without strict directions to follow, an arbitrator may decide to allow more time for the parties to prepare, which could potentially delay the process.
3. Costs
One of the most-cited benefits of arbitration is that the costs are usually lower. While this is usually the case, it is not guaranteed.
The fact that arbitration is faster and more streamlined generally keeps expenses lower. It can be expensive in litigation to have a hearing cancelled at the last minute after all legal teams have fully prepared. They will charge refresher fees in the future when a hearing is rearranged.
Limiting the volume of documents to be exchanged and the number of expert witnesses will also keep costs in check.
It is open to the parties to agree at the outset on how the costs will be dealt with. For example, they could decide that the losing party will pay the other side’s costs. The Arbitration Act 1996 also gives similar guidance to arbitrators, although they can also take into account the parties’ conduct. If one side has caused delays or failed to provide full disclosure, they could be penalised when it comes to costs, even if they have won their case.
The costs will also include the arbitrator’s own fees, charged at an hourly rate.
4. Process
The arbitration process can be tailored to suit your circumstances and provided both parties agree, can be much faster and simpler than litigation. In the run-up to court hearings, satellite litigation can arise over issues such as disclosure and timescales, with extra hearings needed to deal with the trial process itself.
The litigation process is governed by the Civil Procedure Rules and the court can enforce compliance and penalise failures. This can mean a much lengthier process, but it also gives both parties more certainty and the option to ask the court to order the production of certain documents if they are not forthcoming.
During court hearings, there is the opportunity to call as many witnesses as you wish, provided the judge has not limited this, and for each party to cross-examine all witnesses. The arbitration process will generally set limits for how many witnesses each side can use.
It can also be harder for a witness to be compelled to attend an arbitration hearing, although the parties do have the right to use the same court proceedings that are available in respect of legal proceedings to require a witness to give evidence, provided the arbitrator consents or both parties agree.
Other aspects of arbitration are also usually limited, including the number of expert witnesses and the number of pages allowed in written submissions.
5. Access
For a court case to take place in the courts of England and Wales, the court will need to have valid jurisdiction. In some cases, with an international element, the courts might not have the right to hear and decide litigation.
Arbitration is more widely available. Provided the parties agree and an arbitrator can be found, it is usually possible to hear a case from overseas. The initial arbitration agreement will set out the authority that the arbitrator has and deal with issues such as enforcement.
For more information, including some of the advantages of choosing English arbitration to resolve an international legal dispute, see our international arbitration page.
For information in respect of litigation, see our international litigation page.
6. Confidentiality
Arbitration proceedings are confidential, which can be a distinct advantage in some cases. If confidentiality is breached during arbitration, the courts can be asked to take action to penalise this conduct.
Court cases are largely conducted in public. This means that information will be widely available and could potentially be analysed and discussed in relation to a range of issues, including the fact that a dispute has arisen, the allegations made by each side, documentary evidence, reports, and statements produced to the court. While the parties can ask for certain issues to be made confidential, it is the default position of the courts to allow justice to be visible to all.
This is one of the main reasons that arbitration is popular for commercial disputes. It allows those involved to deal with matters out of the public eye while still having a binding outcome.
The initial arbitration agreement will usually include confidentiality clauses, but it is also the case that a duty of confidentiality is implied in the contract.
No details can be discussed following arbitration, including information about the award, unless both parties agree or where there is a legal duty to disclose the information, or it is necessary to protect a right.
In some cases, it could be advantageous to have the right to speak publicly about a dispute, for example, if allegations have been made about a business and have been proven to be false. You will need to consider at the outset whether confidentiality will be a benefit and whether any right to make a statement could be included in the arbitration agreement.
7. Examination of evidence
Cross-examination of witnesses is less common in arbitration, while in litigation, it is expected. In arbitration, the cross-examination may be limited to the contents of the witness statement.
8. Appeal
Following a decision in a court hearing, it is often possible to appeal. In arbitration, an appeal is rarely allowed. It is usually the case that the parties will agree at the outset not to permit appeals. There are limited grounds for appeal, for example, if the process has not been conducted correctly or there has been an error in law.
While it may seem advantageous to be able to appeal, it can be exceptionally expensive, result in uncertainty and a case can drag on for years, which is likely to be disruptive to all concerned.
9. Enforcement
Arbitration awards can be more easily enforced in different jurisdictions than court orders. The arbitration process is recognised internationally, and overseas courts can be asked to make orders enforcing awards, which means that the applicant will be able to rely on the powers available to a local court when seeking enforcement.
10. Relationships
Arbitration can help those involved deal with matters with less conflict than protracted litigation. This means that there is potential for the parties to continue to work together in the future if they wish to do so. In some niche businesses, this can be a particular advantage.
Environmental impact
With a sleeker, faster process, including limits on the volume of documents, the environmental impact of arbitration is generally less damaging than that of litigation. There is the option to conduct all hearings remotely and, in some cases, decisions can be made on the basis of submissions without the need for hearings. Disclosure of documents and exchange of witness statements can also be dealt with entirely electronically.
Further reading
Remedies for breach of contract
Resolving a shareholder dispute
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We are pleased to announce that we have won the Global Awards by ACQ5 award for Best Firm for Commercial Disputes London 2023. We were named as the ‘Commercial Disputes Specialists of the Year’ in the Corporate Livewire Innovation & Excellent Awards 2020 as well as ‘Boutique Litigation Law Firm of the Year’ in both the 2019 and 2020 Global Awards by ACQ5. Partner, Dipesh Dosani, was named Commercial Litigation Lawyer of the Year in 2019 and 2020 in the ACQ5 Law Awards.
If you would like to talk to one of our expert legal team about a contract dispute, call us on 020 3968 6030, email us at enquiries@lincolnandrowe.com or fill in our contact form and we’ll be happy to help.
The above information is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your rights or legal advice about what action to take, please contact a legal advisor.
