Litigation vs Arbitration — What to Consider

Corporate compliance programs

The speed of arbitration is often favored over the benefits of litigating, which is why so many companies now include mandatory arbitration clauses in their contracts. But there’s much more to consider before including such a clause, so don’t be hasty.

1. Time

It can’t be overstated how much everyone wants to avoid the tedium of waiting for a day in court. One should consider, though, the possibility of international investigations, multiple parties, cross-border disputes. Law is law, and law is slow when we’re all having our say. The speed of the process always depends on the case’s complexity. General rule of thumb is arbitration is faster.

2. Cost

Time is money, and the time saved in arbitration might have to be paid for in fees, a panel, a judge, and of course the settlement. Arbitration helps keep these discussions more private, but it’s an exchange of money vs reputation. Still, an arbitrator will be less inclined than a judge to entertain extensive discovery and motions practice, both of which frequently drive the fees and costs of litigation. So when the price of the investigation would me more than the case is worth, arbitration is the happy medium.

3. Confidentiality

As mentioned, arbitration is much more private. Unlike court, there are no public hearings and no public record. This is crucial if dealing with sensitive internal matters or if your corporation has a careful image to maintain. Think of arbitration proceedings as mock trials whose results help settle a private argument. Again, situation, matters, however. international investigations by nature involve more parties and makes even arbitration messy.

Know, too, that confidentiality can backfire. Without the protocols of the court, there may be uncertainty as to whether things proceed fairly, and if that uncertainty seeps into the public mind with no record to confirm, this could breed a public relations nightmare.

4. The Law

This is the most important and sometimes sticky question: do you want your dispute settled based on precedence, or do you want to be free of certain courtroom constraints?

Arbitrators can interpret the law without the strict, sometimes cumbersome protocols of the court. But international investigations might require the court’s structure to fairly parse things out.

5. Knowledgeable Judgment

You cannot choose your court judge, and therefore it is very easy to work with a judge who is unfamiliar with your industry. Lack of understanding impedes the case and endangers your chances of a fair judgment. Through an arbitration service you can select a knowledgeable arbitrator who you know is an expert in this area.

6. Appeal

In court, you can appeal a verdict you see as wrongful. Arbitration does not often hold this option. This shouldn’t be overlooked, as it’s impossible to predict what cases may come up.

Legal proceedings and litigation are complicated, and no advice can be universally applied. It’s best to keep your options open and ask the right questions regarding your own business.

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