Litigation vs Arbitration
Whether we have ever been dragged into a law court or not, we all know what litigation means because of so much we hear and read about it in the newspapers and TV. We know that it involves hiring of attorneys by warring factions and accusations and replies by the opposing parties through their lawyers in front of a jury. We also know how costly litigation is and its ramifications through the experiences of those who have gone through it. Litigation is mostly civil in nature and the outcome of litigation is uncertain until the jury or the judge gives his verdict in favor of one or the other party. Arbitration is a similar concept which is an alternative to litigation when it comes to resolution of disputes. Let us see how arbitration is different from litigation as many people remain confused by the two terms.
Arbitration is a clause that is deliberately put in place in a contract that is agreed upon by two parties and serves as a mechanism for settlement of disputes should they arise in future course of action. Arbitration involves employing a third party who is neutral as an arbitrator and the two parties entering the contract agree that the decision of the arbitrator in case of a dispute shall be binding upon them. In some cases, both parties select their arbitrators and these two arbitrators decide on a neutral arbitrator for resolution of dispute. These three arbitrators then constitute a bench that passes its ruling on any dispute between the parties.
When we compare arbitration with litigation, we find that arbitration is a private mode of settlement of disputes where as litigation is a public mechanism of settlement of disputes. Arbitration is preferred over litigation because it is faster, efficient and much less expensive than litigation. It is also referred to as ADR which stands for Alternative Dispute Resolution. The arbitrators can be lawyers, retired judges or they can be persons with no prior legal experience such as accountants and engineers. This is the major difference with litigation which always has the presence of attorneys and a jury comprising judges.
Litigation is another name of law suit that is heard in a state or federal court. On the other hand, arbitration is a private dispute resolution mechanism and both parties agree to the clause of arbitration thereby making it binding upon the parties to accept the verdict even if they feel aggrieved by the decision of the arbitrator. Like litigation, parties have a right to present evidences and witnesses in their favor to make their case strong.
Difference Between Litigation and Arbitration
• Litigation is a law suit which arbitration is not
• Litigation always involves hearings in a court of law in front of a jury while arbitration involves resolution of disputes through a neutral third party
• Litigation is expensive as it involves various fees of attorneys and the court whereas arbitration is faster and cheaper
• An arbitrator, though normally he is a lawyer or a former judge, can be a person with no formal legal experience. In litigation this is not possible
• In litigation, losing party can appeal in a higher court of law while this is not possible in arbitration.