Introduction

Central to this question is an examination of the material differences between arbitration

and litigation, to ascertain whether arbitration offers any real significant advantages for
parties involved in a dispute.
Before getting into the discussion, we will first define arbitration and litigation.
Definitions
Litigation can be simply defined as the act of bringing or contesting a lawsuit in court. Parties in
disputes before going into litigation may negotiate on resolving their disputes but where there is
a deadlock, negotiations will fail and the next step is to resort to the traditional method of
resolving such disputes which is litigation. There is the intervention of a third party neutral,
acting in an official capacity as a judge, with wide powers to examine the facts of disputes as
presented and on the basis of the applicable law make a binding pronouncement on the rights,
obligation and liabilities of disputants. Disputants are represented by lawyers who present the
case of the disputants to the judge. Unlike in civil law systems, common law uses the adversarial
proceedings in which the judge doesn’t examine or cross-examine parties in disputes and their
witnesses or in other words the judge doesn’t descend into the arena. He merely observes, listens,
writes and makes his verdict or judgment.
With attendant factors such as excessive cost of legal services, frustrating delays in determining
the substance of the dispute, issues of confidentiality, cumbersome and technical procedures to
conform to makes litigation largely criticized. Commercial men and women are by their nature
and practice of their business in a hurry when a dispute arises in their business transactions to
have their rights and liabilities determined as soon as possible without undue waste of time so
that they can get on with their business. Hence, a faster and cost-effective procedure is sought for
to resolve their dispute.
Arbitration is one form of Alternative Dispute Resolution. It is defined as ‘a procedure for the
settlement of disputes, under which the parties agree to be bound by the decision of an arbitrator
whose decision is, in general, final and legally binding on both parties.’ Arbitration is also seen
as a device whereby the settlement of a question, which is of interest for two or more persons, is
entrusted to one or more other persons – the arbitrator or arbitrators – who derive their powers
from a private agreement, not from the authorities of a State, and who are to proceed and decide
the case on the basis of such an agreement. Furthermore Halsbury’s Laws of England sees it as a
process by which a dispute or difference between two or more parties as to their mutual legal
rights and liabilities is referred to and determined judicially and with binding effect by the
application of law by one or more persons (the arbitral tribunal) instead of by a court of law.
Essentially arbitration is a party-driven procedure. They are at liberty to choose whosoever is
knowledgeable on the core principles surrounding their dispute, decide on where the arbitration
will take place, agree on which rules and laws will be applied, the language to be used etc.
Arbitration can be voluntary (the parties agree to do it) or mandatory (required by law). Most
contract arbitration occur because the parties included an arbitration clause requiring them to
arbitrate any disputes “arising under or related to” the contract.
Similarities
Advantages of arbitration over litigation
Predictability: A frequent complaint of courtroom litigation is that some judges do not
understand the nature of certain complicated disputes, often leading to unpredictable and
unsatisfactory results. Ideally, arbitration is heard by a third-party neutral or neutrals with
experience and knowledge in the area of dispute (e.g., commercial construction). Arbitrators do
not have to be lawyers and many times can be engineers, architects, contractors or developers.
This characteristic of arbitration can eliminate the substantial problems and time involved in
educating a judge or jury in the nuances of construction. Properly selected arbitrators understand
and focus on the most material issues in the dispute and are not easily swayed by lawyers’
emotional arguments or some expert witness.
Speed: As a public process, Litigation must adhere to laws and regulations set out to satisfy
public notions of justice throughout case prosecution. A lot of time is required to file documents
in support of a case, give notices appropriately and all other activities associated with pre-trail.
Also, activities of the trial itself, hearings, judgments, and the benefit of appeal to higher courts
by dissatisfied litigants take a lot of time. This slows down the dispensation of justice resulting in
unnecessarily long cases. In these circumstances, a fast case may take a year to conclude by
litigation. In fact, it is not unusual to find cases stretching over a decade. Because there is no
crowded court docket, an arbitration hearing can often be scheduled in a matter of months, not
years. Even when millions of dollars are at stake, generally hearings can be scheduled more
quickly than a court hearing. In addition, there are fewer and more restrictive grounds for
appealing an arbitration award, so finality is the rule rather than the exception.
Costs: In most cases, the costs and expenses of arbitration are less than litigation. Because
litigation is often criticized for the time and expense of pretrial discovery, it is significant that,
with a few exceptions, discovery is limited in arbitration. The absence of prehearing motions and
multiple depositions, as well as the finality of the decision, can reduce attorneys’ fees and costs.
While for some companies, prehearing motions—and possible disposition—of a case “on the
law” is of major significance, many arbitration administrative bodies do allow for prehearing
dispositive motions in more contemporary rules. And lastly, the cost of prolonged personal
involvement by key company employees can be at least minimized.
Confidentiality: Unlike courtroom litigation, arbitration is private and confidential. The
proceedings are not public records. Arbitrators maintain the privacy of the hearings unless some
law provides to the contrary. Arbitration is usually in private and awards, which are the final
decisions of arbitration panels, are not published. Court proceedings are usually open to the
public and there are also established platforms for reporting court judgments. Arbitration
guarantees the privacy of the parties and the confidentiality of the dispute, unlike litigation where
anybody is free to attend court proceedings.
Involvement by parties: In arbitration, parties have control over choice of arbitrators, language,
schedule, venue, applicable law, procedural rules etc. while in litigation; parties do not exercise
such control over the process. For instance, parties in arbitration may select arbitrators that suit
their case. An arbitrator can either be a lawyer or an expert depending on the technicality of the
issue of the issues to be decided. This opportunity is not usually given in litigation.
Satisfaction of parties with the outcome: Parties’ satisfaction with arbitration process is often
higher than that of litigation despite the similarities in their outcome approach. This may be
because of the businesslike and less adversary approach to resolution in arbitration and the
involvement of the parties throughout the process of arbitration as against the more adversarial
approach in litigation.
Decisions: A unique feature of arbitration is that its decisions known as awards are final and
binding on the parties and are non-appealable. However, Court judgments are subject to a long
trail of appeal ending at the Supreme Court. Decisions given by the courts are known as
judgments which are appealable up to the Supreme Court.
Flexibility: Whereas Arbitration is a flexible process. As a private tribunal for parties in dispute,
proceedings can be arranged to accommodate the convenience of the parties. From the onset,
parties and arbitrator(s) can set out a program that is convenient for them in every way
(especially cost). All Arbitrators are also expected to conduct proceedings diligently and
efficiently in a timely manner.
Conclusions
Though arbitration and litigation as dispute resolution mechanisms share some similarities, they
are not birds of a feather. In general, arbitration may be the better option if the agreement you
wish to settle is so technical that you would prefer to have (an) experienced arbitrator(s) resolve
it in the case of a dispute. Also, arbitration may be the better option if the value of said
agreement justifies paying the significant arbitration costs. On the other hand, if you wish to
enter a standard type of agreement (for example, an annual lease agreement), then choosing
litigation could be the better option. Nonetheless, Arbitration is rapidly gaining grounds as a
favoured mode of dispute resolution and for good reason too.