The Benefits of Litigating versus Arbitrating
Many business owners shy away from litigation, often times going so far as to insist a mandatory arbitration clause be written into any contract. While arbitration does have its advantages, there are a number of benefits of litigating that should be given equal consideration before committing to one course or another. Here we’ll consider the benefits of litigating versus arbitration.
Benefits of arbitration
- Speedier resolutions
The most recognized benefit of arbitration is likely time. There is no denying the fact that arbitration often allows for a speedier resolution by avoiding the time-consuming procedures of court hearings. In addition to avoiding the lengthy court process, arbitration also limits the ability to appeal, enabling a faster resolution. - Preserving relationships
Arbitration has the added benefit of being less adversarial than litigation. If the parties hope to continue a future relationship after settling the dispute, or if there is a particular incentive to maintain amicable relations, arbitration is more likely to provide such an outcome. This doesn’t mean that litigation is necessarily going to destroy a relationship, but arbitration tends to be a gentler process. If preserving amicable relations is a top priority, mediation may be an even better recourse than arbitration. - The ability to choose your arbitrator
Another benefit of arbitration is that the parties are able to choose their own arbitrator. Likewise, they are guaranteed only one arbitrator throughout the entire arbitration process, from pre-hearing disputes to final determination. In litigation, the court assigns a judge and the case may even see more than one judge over its course in cases of pre-trial disputes and appeals. - Access to specialized arbitrators
Hand-in-hand with the above benefit of choosing your arbitrator, is the added bonus of being able to choose an arbitrator who has expertise in your subject matter. Whether the judge or arbitrator has such expertise may not matter often, but it is certainly not one of the benefits of litigating. - Confidentiality
When it comes to confidentiality, arbitration wins out over litigation. Since there is no public trial, arbitration doesn’t create a public record of the dispute. An arbitration clause can even include a confidentiality requirement. For publicly held companies or when dealing with sensitive matters, this added discretion can be a major benefit.
The benefits of litigating
While the lack of an appeals process can be listed under a time-saving benefit of arbitration, having the ability to appeal can also be among the benefits of litigating. With arbitration, the decision, once made, is final, even if a mistake is made. While the court appeals process can be lengthy and time-consuming, it at least promises the parties an opportunity to have an erroneous decision overturned.
If confidentiality is a benefit of arbitration, publicity can likewise be one of the benefits of litigating. The threat of a public trial can at times lead to a speedier settlement. Most personal injury cases in the U.S. are motor vehicle accidents and as many as 96% of personal injury cases are settled before a trial.
Arbitrators are not as constrained by the law as court judges. While this may not sound like a benefit of litigating, consider: How important is avoiding uncertainty in the final decision? Since arbitrators have the more flexibility, their decision may not exactly align with the law.
A judge, on the other hand, is bound by the law. A court trial must follow the rules of evidence. Thus, verdict determined by a judge in a courtroom is certain to at the very least abide by the law. Another of the benefits of litigating, then, can be the confidence of knowing there is no uncertainty about the process through which a verdict was reached. If the verdict itself feels questionable, there is always the appeals process to fall back on.
The decision to arbitrate or litigate is an important one. With the threat of personal injury litigation or accusations of employment discrimination – – one third of black Americans report having been discriminated against in the past year – – it can be tempting to write a mandatory arbitration clause into all contracts to avoid the risk of lengthy litigation. However, savvy employers and their counsel will weigh the benefits of litigating versus arbitration before committing themselves to mandatory arbitration.
