What is the difference between arbitration and litigation?

The difference between arbitration and litigation is that arbitration is a private and informal method of dispute resolution that involves a neutral third party, called an arbitrator, who makes a final and binding decision based on the evidence and arguments of the parties. Litigation is a public and formal method of dispute resolution that involves a court, a judge or jury, and strict laws and statutes that govern the proceedings. The decision of a judge or jury can be appealed to a higher court.

Some of the advantages of arbitration over litigation are:

•  Speed: Arbitration can be faster than litigation, as it does not depend on the court schedule and has limited discovery and procedural rules. According to the American Bar Association, the average arbitration case takes about seven months, while the average litigation case takes from 23 to 30 months.

•  Cost: Arbitration can be cheaper than litigation, as it avoids court fees, extensive discovery, and lengthy appeals. According to a study by NERA Economic Consulting, the average cost of arbitration is $1.6 million, while the average cost of litigation is $2.8 million.

•  Flexibility: Arbitration can be more flexible than litigation, as the parties can choose the arbitrator, the rules of procedure, the language, the place and the time of arbitration. The arbitrator can also tailor the process to suit the needs and interests of the parties.

•  Confidentiality: Arbitration can be more confidential than litigation, as the arbitration agreement, the proceedings and the award are not disclosed to the public. This can protect the reputation and privacy of the parties and prevent unwanted publicity or interference.

Some of the disadvantages of arbitration over litigation are:

•  Finality: Arbitration can be less appealing than litigation, as the arbitral award is usually binding and has limited appeal rights. The parties cannot challenge the merits or the facts of the award, only some procedural or jurisdictional aspects. The grounds for setting aside or refusing to enforce an arbitral award are narrow and similar to those provided in Article V of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

•  Neutrality: Arbitration can be less neutral than litigation, as the arbitrator may have some bias or interest in favor of one party or another. The arbitrator may also lack expertise or experience in the subject matter of the dispute or in applying the applicable law. The parties may also have unequal bargaining power or influence in selecting or challenging an arbitrator.

•  Accountability: Arbitration can be less accountable than litigation, as there is no public oversight or scrutiny of the arbitration process or outcome. The arbitrator may not follow the law or give reasons for his or her decision. The arbitrator may also make errors or mistakes that cannot be corrected or reviewed by a higher authority.