Arbitration v. Litigation : What Is The Difference

Owing to the nature of humans usually, conflicts and disputes are inevitable. Hence the need for the existence of dispute resolution mechanisms in order to prevent anarchy in society. Court litigation is the usual method for dispute resolution in most states. But the deficiencies of the system have prompted the increasing use of alternative dispute resolution methods. Such as Negotiation, Mediation, Arbitration. By litigation, we all will remember PIL or public interest litigation which was in our school syllabus. 

What is Arbitration?

Arbitration is one form of Alternative Dispute Resolution. It is a process where both parties come together. And both of them agree to follow and revere the decision of the arbitrator. This is one route you can try rather than filing a lawsuit and going to court to resolve a dispute. The arbitrator is generally an attorney familiar with the field of law that needs to be involved in the decision-making process. The decision of the arbitrator is legally binding against both parties, even though the decisions may be appealed, in some cases.

The use of Arbitration is a private form of settlement between parties. Appointing individuals as arbitrators are considered a practical means of a prompt and fair settlement of disputes. And this may result from commercial transactions in the field of goods and services. Arbitration has numerous advantages for the parties implicated in the dispute through their trust in the arbitrators, the confidentiality of information among others. When it is at an international level, it is known as international arbitration. 

What is Litigation?

By the word “litigation“, we mean going to court for settling the dispute between or among parties. It is a legal proceeding initiated between the opposing parties. It has the aim of enforcing or defending legal rights. In this process, they bring the case to the court. Wherein the judge (appointed by the court to act as the litigator) gives his/her verdict on the issue after considering all the arguments, evidence, and facts presented by the lawyers of the parties. If the parties disagree with the decisions of the court, they can appeal to a superior court for getting justice. But they have to fulfill certain conditions.

The court has a definite and formal procedure for settling the issue between the parties concerned, which they should follow strictly. Due to the rigidity and high cost comprised in the litigation process, there are examples when parties go to arbitration. One can file Public interest litigation for the sake of others’ welfare. 

What is the difference between arbitration and litigation?

The arbitration procedure is private, between the two parties, and informal. Whereas, litigation is a formal process conducted in a public courtroom.

The arbitration process is very quick. In civil litigation, on the contrary, a case must wait until the court has a moment to hear it. This can mean many months, even years before the judge hears the case. In litigation, the judge is appointed, and the parties have little or no say in the selection. The clients may have some say in whether a judge or a jury hears a case. In arbitration, the two parties usually decide together on an arbitrator, unless the decision is specified in the arbitration clause of a contract. The costs for the arbitration process are limited. Costs for litigation can be very high.

How are arbitration and litigation similar?

Ultimate aim: Both mechanisms ultimately aim to solve the disputes between clients. 

Involvement of a third party: There is a third party called the Arbitrator. They regulate the content and outcome of proceedings of arbitration. While the third party involved in litigation is a Judge. Even though the parties in arbitration regulate the choice of their Arbitrator while the parties in litigation have no control over the choice of the Judge. Both mechanisms share the similarity of the involvement of a neutral third party who regulates the result of their proceedings.

Outcome approach: The outcome of both dispute resolution mechanisms is generally the Win/lose outcome. As against that of some other dispute resolution methods like Mediation, Negotiation, and Conciliation which is usually Win/Win. The win-lose approach refers to the circumstance. Whereby they make one of the parties to benefit more to the detriment of the other party in the outcome of the proceedings.

Which one of these two is better? 

The level of dissatisfaction in India is substantial, to arbitration with international arbitration. The attribution of dissatisfaction could be to the below-mentioned obstacles to an effective arbitration procedure in India.

Lack of uniformity in the procedures and administration of arbitral awards was an acute issue for parties to arbitrate to do settlement of issues. 

Arbitrational claims can vary to a great extent. A state might be brought to arbitration for a compensatory claim. Such as expropriation, or may itself start arbitration proceedings with other states over claims such as those associated with international borders. It would be correct to say that arbitration is a conscious trial of parties to avoid the delay. Hence the unjust or inefficient method of obtaining resolution of the courts.

There is no one form of “arbitration” as such to compare to litigation.

Though arbitration and litigation as dispute resolution mechanisms share some similarities, they are not birds of a feather. Many see arbitration as an alternative mechanism that has come to fill up lapses in litigation. Some others feel arbitration is just another method of dispute resolution which has its own deficiencies. It will however be correct to say that arbitration is rapidly gaining grounds as a favored mode of dispute resolution and for good reason too. Even though public interest litigation has good intentions, the method has its own pitfalls.