Litigation vs Arbitration
We are all familiar with litigation, even if we have not personally experienced it, through news reports and television shows. Litigation typically involves hiring attorneys to represent opposing parties in a civil dispute, with the outcome being uncertain until the judge or jury delivers a verdict. Arbitration, on the other hand, is an alternative method for dispute resolution that many people may not fully understand.
Key Takeaways
- Arbitration is a clause deliberately included in a contract between two parties, which provides a mechanism for settling disputes that may arise in the future.
- Arbitration involves the appointment of a neutral third party, known as the arbitrator, whose decision is binding on both parties involved in the dispute.
- Compared to litigation, arbitration is a private, faster, more efficient, and less expensive method of dispute resolution, often referred to as Alternative Dispute Resolution (ADR).
Arbitration is a clause intentionally incorporated into a contract between two parties, serving as a means for dispute resolution should any issues arise in the future. The process involves appointing a neutral third party, the arbitrator, whose decision in the case of a dispute is binding on both parties. In some instances, each party selects their own arbitrator, and these two arbitrators then choose a neutral arbitrator to resolve the dispute. These three arbitrators form a panel that issues a ruling on any disagreements between the parties.
When comparing arbitration to litigation, it is evident that arbitration is a private method of dispute resolution, while litigation is a public process. Arbitration is often preferred over litigation due to its speed, efficiency, and lower cost. This alternative method of dispute resolution, or ADR, can involve arbitrators who are lawyers or retired judges, as well as individuals with no prior legal experience, such as accountants or engineers. This contrasts with litigation, which always includes the presence of attorneys and a jury composed of judges.
Litigation refers to a lawsuit that is heard in a state or federal court, while arbitration is a private dispute resolution mechanism. Both parties agree to the arbitration clause, making it binding for them to accept the verdict, even if they feel aggrieved by the arbitrator’s decision. Like litigation, parties have the right to present evidence and witnesses in their favor to strengthen their case.
Difference Between Litigation and Arbitration
- While litigation is a lawsuit, arbitration is not.
- Litigation involves hearings in a court of law in front of a jury, while arbitration relies on the resolution of disputes through a neutral third party.
- Litigation can be expensive due to various attorney and court fees, while arbitration is typically faster and cheaper.
- An arbitrator can be a person with no formal legal experience, whereas this is not possible in litigation.
- In litigation, the losing party can appeal in a higher court of law, while this is not an option in arbitration.
