20+ Differences between Litigation And Arbitration (Explained)

When contract parties have a legal disagreement, they may go to court. However, the parties may not have a choice based on the contract. Instead, they may have to arbitrate.

Using a “conflict resolution” provision, parties might agree in advance to arbitrate any legal problems emerging from the contract.

After agreeing, parties can’t sue each other for certain conditions. When parties willingly agree to them, courts will enforce contract arbitration provisions.

Comparison Between Litigation And Arbitration

Parameter	Litigation	Arbitration
What it means	Litigation is the process of settling a disagreement using a court’s judgment, and it is included under the scope of the legal system as a whole.	Disputes may be resolved via the use of arbitration, which requires the appointment of a neutral third party to examine the case, listen to the evidence, and then come to a judgment that is legally binding after coming to a conclusion after the investigation and listening to the testimony.
How it works	A trial is a public process governed by established Rules of Procedure and Rules of Evidence, which determine how it is performed and decided. Litigation is a public procedure.	Because the resolution of disputes between parties in arbitration is both confidential and private, this form of dispute resolution is a good option for companies that want to keep their private matters away from the eyes of the public and the press.
Time taken	Litigation often takes a lot longer due to the formal Rules of Procedure and Rules of Evidence, in addition to the backlog that the courts are experiencing (which has been exacerbated by COVID-19).	After the arbitrator has been appointed, the parties and the arbiter will usually come to an agreement on a timeframe for the proceeding. This allows arbitration to provide a decision in a far less length of time than litigation may.
Trial decisions	In a civil trial, one of the parties has the right to appeal the court’s verdict if they consider that the other party made a serious error while the procedure was going on. This is because both parties share the responsibility for the conduct of the proceeding.	The arbitrator’s judgment is final and binding, and there is no way to appeal it, with very few exceptions, unless both parties expressly agree differently in writing. The arbitrator’s decision cannot be overturned.
Participation	When the matter is being litigated, the parties may likely be required to engage in some court proceedings.	Unless both of you are bound by contracts that clearly mention this obligation to participate in the arbitration process, it is not feasible to force the other party to participate. In any other scenario, to participate in the process, both parties must provide their permission before moving further.
Judge	During the course of a legal proceeding, the trial judge will be chosen by the court of their own will and not in consultation with the parties involved in the case.	The parties involved in the arbitration process are the ones who choose the arbitrator, and their choice is often impacted by the arbitrator’s degree of expertise in a particular field of law or business that is pertinent to the dispute.
Cost	Litigation may cost more than arbitration due to the lengthy and time-consuming nature of pre-trial discovery and appeals processes.	The reduced timeframe is the major aspect that is likely to make the cost-effectiveness of arbitration more likely. On the other hand, it is permissible for both the arbitration organization and the arbitrator to charge fees at their own discretion. The expenses of these fees are divided equally between the two parties in dispute.

Major Differences Between Litigation And Arbitration

What exactly is Litigation?

Litigation is taking a matter to court. It’s a judicial process aimed at enforcing or protecting a legal claim.

In this procedure, the matter is taken to court, where the judge (chosen by the court to function as the litigator) issues his/her decision after evaluating the attorneys’ arguments, evidence, and facts.

If parties disagree with a court’s ruling, they may appeal to a higher court if certain circumstances are met. The court has a rigid system for resolving disputes between parties.

Key Differences: Litigation

Litigation is a legal term that refers to the process of taking a matter all the way up to the highest court in the land to have it resolved.

There is also something called criminal litigation in addition to civil litigation.

The process of litigation is open to the public.

The sole location where the lawsuit takes to occur is in court.

When a dispute goes to court, the parties involved have no influence in selecting the judge to determine their case.

Only the court may choose who will serve as the judge.

When there is litigation, the parties involved have the ability to appeal to a higher court if they disagree with the judgment that the lower court reached.

What exactly is Arbitration?

Arbitration is a private technique of resolving disputes in which the parties mutually pick independent, neutral arbitrators.

The arbitrator investigates the problem and hears the parties’ arguments and evidence to make final, enforceable recommendations.

The disputing parties may agree to use arbitration as a method of alternative dispute resolution. The parties’ agreement to arbitrate must be in writing.

Key Differences: Arbitration

Arbitration is a conflict resolution technique in which a neutral third party is chosen to investigate the conflict and listen to all sides of the story.

Arbitration is always conducted in a polite manner.

Arbitration is a private technique of settling disputes between the parties, during which the agreement to keep everything completely secret is maintained.

The parties who are trying to reach a settlement are the ones who select where the dispute will go to be arbitrated.

In arbitration, the dispute is resolved based on the arbitrator’s decision chosen by the parties involved.

The costs associated with the arbitration proceedings are often far cheaper than those associated with the litigation process.

The arbitrator’s judgment is both definitive and legally binding so that no further appeals can be lodged against it.

Contrast Between Litigation And Arbitration

Selection of Judge:

Litigation- The court will choose the judge who will preside over a case, and the parties to the dispute will have very little to no say in the choices that are made about that case.

It is conceivable for the parties to have some influence on the decision that will be made by a judge or a jury when they are ready to render a verdict on a particular subject. When individuals say they are involved with the party, they mean just this.

Arbitration- In the process of arbitration, the choice of the arbitrator will typically be made jointly by the two parties that are involved;

However, suppose the contract contains language that specifies who will make the decision and under what circumstances that decision will be made. In that case, the choice of the arbitrator will typically be made solely by one party.

Procedure cost:

Litigation- The litigation expenses include attorney fees, pre-trial expenditures such as record searches, interrogatories, and depositions, as well as court costs, all of which may mount up to a significant number. Court costs are often the most expensive component of the litigation process.

Arbitration- The costs linked with the arbitration process are restricted to those associated with the arbitrator’s charge and the fees associated with the attorney. These costs are the only ones that are incurred throughout the process.

It is possible that in addition to paying for the arbitration itself, you will also be required to pay for the expense of the location where it will take place. This is one of the many potential outcomes of this scenario.

Working speed:

Litigation- It’s common knowledge that the legal system moves at a snail’s pace. A case that is filed today may not go to trial for anywhere between 18 and 36 months, depending on the jurisdiction in which it is filed.

When attorneys do not cooperate with one another by pro-actively complying with court rules regarding the civil procedure and discovery, there will be an abnormally high amount of back-and-forth between the parties and the judge, which has the potential to bring the entire process of litigation to a complete and total standstill.

Arbitration- Arbitration is often more efficient in terms of time than litigation. When it comes to most arbitrations, the parties often have to wait little more than a few months between the beginning of the procedure and the time when the main hearing is held.

During the course of arbitration, there is often a less established procedure, which means there is less possibility for competition to drag down the process.

Flexibility:

Litigation- In most legal cases, the parties involved cannot choose the judge. In addition to following the local norms of civil process and evidence, litigants must also follow the procedures and regulations of their assigned judges.

Meetings are often required to occur in the judge’s courtroom at times and days chosen by the judge, even if this requires the parties to rearrange their schedules.

Arbitration- Arbitration procedures, such as the “Commercial Arbitration Rules and Mediation Procedures” of the American Arbitration Association, may be selected by the parties in addition to the arbitrators.

The arbitration rules the flow of the hearing, and other procedural issues may all be modified by the parties. The arbitration hearing and any additional sessions may be held whenever and wherever the parties agree upon.

Appealability:

Litigation- This is so because it is possible to challenge judicial or magistrate rulings. When the losing side in a legal dispute chooses to appeal a judge’s judgment, everyone involved in the case must put up further work and incur additional costs to take the issue to the next level.

Since appellate courts may rule partially in favor of the appellant and partially in favor of the appellee, no one can be sure who will come out on top in an appeal.

Arbitration- However, arbitration is typically final and cannot be challenged in court. As a result, the conclusion reached in arbitration is often the last word in the case unless the parties agree that an arbitration decision would be appealable.

Since arbitration rulings are often not subject to appeal, the parties to a dispute may reach a final resolution far more quickly than they would if they went to court.

Predictability:

Litigation- Even when the parties to a dispute are on the same page about the applicable law, the outcome of a lawsuit can be surprising for several reasons. One reason is that a judge isn’t appointed until after a case has been filed.

Secondly, there is no assurance that a judge would rule a case by their previous judgments in comparable cases, even if the parties to the case are aware of the judge’s previous rulings on similar cases.

Arbitration- The parties to an arbitration agreement should expect more stability. Furthermore, arbitrators often have familiarity with the parties’ business or the topics at stake in the case.

Thus, unlike judges and juries, arbitrators are less likely to be swayed by passion, charisma, or sentiments and more likely to focus on the true problems at hand in a dispute.

Nature:

Litigation- To exert pressure on defendants in both the court of law and the court of public opinion, plaintiffs and their attorneys are often eager to bring litigation against them.

However, the public character of litigation might expose both parties to reputational harm and financial losses in cases where both sides are likely to make unpleasant factual and legal charges against the other, such as in contract disputes.

Arbitration- The arbitration proceedings, on the other hand, are virtually usually kept confidential. In the absence of a public arbitration docket, the proceedings of any given arbitration are not subject to public inspection.

Neither the arbitration papers nor any other documents the parties submit may be made public. Therefore, the parties participating in arbitration procedures and the nature of their dispute are seldom concerned about public scrutiny.

Frequently Asked Questions (FAQs)

Q1. What exactly is binding arbitration?

Answer. When two parties agree to submit a disagreement to arbitration, they often agree to abide by the arbitrator’s judgment.

Except as expressly provided for in an arbitration agreement or contract, the parties to a binding arbitration have no right of appeal. If it can be shown that the arbitrator was prejudiced, the court may void (remove) the arbitrator’s judgment.

Q2. How much time does the arbitration process take?

Answer. The time required to complete the arbitration procedure is much less than that of the litigation process.

After it has been decided to take the matter to arbitration, the parties will choose and employ an arbitrator and designate a site for the proceeding, and then the case will get underway. Arbitration, as opposed to litigation, does not include any of the complex pre-trial steps that litigation involves.

Q3. What precisely is the purpose of the procedure that is known as arbitration?

Answer. The resolution of community disputes, and the settlement of litigated claims through court-annexed programs.

The resolution of contractual disputes management and labor and the resolution of contractual disputes between management and labor are the four functions that arbitration can perform.

Q4. Is a lawsuit the same as legal one?

Answer. The term “litigation” refers to a legal procedure but does not include the action that is mandated at the conclusion of a lawsuit.

It also does not include the steps taken to enforce a legal right once a lawsuit has been filed since this is not included. The act of taking control of or actively participating in a legal proceeding is called litigation.