Litigation vs Arbitration (Difference: All You Need To Know)

Looking for Litigation vs Arbitration?

What is Litigation vs Arbitration?

What’s important to know about these concepts?

Keep reading as we have gathered exactly the information that you need!

Let me explain to you the key differences between Litigation vs Arbitration!

Are you ready?

Let’s get started!

What Is Litigation vs Arbitration

You may have heard of the terms litigation and arbitration in the news and in business.

Have you ever really thought about what they mean and how they differ?

Before I get into comparing the terms litigation and arbitration, it’s important to first define each of these terms.

Litigation is a term used to refer to the process that a person or company will need to go through in order to exercise a legal right or take legal action against someone.

In essence, litigation starts outside of the courtroom from the moment a person or company believes that their rights have been violated or they wish to exercise certain legal rights before the courts.

The term litigation is often used to refer to legal action instituted before civil courts where a judge or jury decides the outcome of the legal action.

Arbitration, on the other hand, is a specific process whereby parties involved select a neutral third party (the arbitrator) to help them resolve the dispute instead of going to court.

The arbitrator will have the power to render a judgment that will be legally binding on the parties but the parties will have more control in defining how the arbitration proceedings will be carried out.

Keep reading as I will break down the main differences between litigation and arbitration.

Recommended article: What are compensatory damages

Differences Between Litigation And Arbitration

Although both litigation and arbitration are methods allowing parties to invoke their rights or exercise legal action against one another, they are very different.

Although the term litigation encompasses steps taken by a party outside of a courtroom and can even broadly include arbitration, for the sake of this section, I will refer to “litigation” as a legal dispute before the regular courts and “arbitration” as a dispute before a designated arbitrator.

With that said, let’s look at the main differences between litigation and arbitration.

Judge vs Arbitrator Assignment

In the context of legal proceedings before the court, typically the parties do not have a say on who will be the judge appointed to their matter.

When a party files legal action, the court will assign a judge to handle the matter based on their internal selection process.

On the other hand, in the context of arbitration, the parties are the one that selects the arbitrator who will be mandated to resolve their dispute.

In this context, the parties will have much greater control over the person ruling over their case.

Judge vs Arbitrator Fees

Another important difference between litigation and arbitration is with regard to the cost associated with the person selected to resolve their dispute.

In the context of litigation before the courts, the parties are not required to pay for the judge’s time in dealing with the case.

Typically, judges are paid a salary from the government and will not directly charge the parties.

On the other hand, an arbitrator is a person mandated to hear the parties’ disputes and make a decision.

Generally, the parties will have to bear the arbitration fees in dealing with the matter.

The more the parties solicit the arbitrator and have the person work on the case, the more expensive it can get.

Recommended article: What are professional fees

Type of Proceedings

Litigation and arbitration differ in regard to the manner the actual legal proceedings are handled.

In the context of litigation before the courts, the parties are required to file their legal action and pleadings before the competent court.

Whatever document or pleading is filed will generally be available to the public.

On the other hand, in arbitration proceedings, the parties handle the legal action privately based on the rules that they mutually agree to set.

The arbitration proceedings are private and will not be available to the public to see.

Evidence Presented

There are differences in the manner evidence is presented in litigation and arbitration proceedings.

In lawsuits filed before the court, the parties will need to file their evidence by respecting the applicable rules of evidence used by the court.

The rules of evidence are well-known by all litigation lawyers and the parties will need to observe them.

On the other hand, in arbitration proceedings, the parties have more control over how evidence will be administered.

In essence, the parties can mutually agree to set the rules on the manner evidence will be presented and what can be filed before the arbitrator.

Jurisdiction

Civil lawsuits can only be filed before the court that has the proper jurisdiction to hear the matter.

If the court does not have proper jurisdiction, it will need to decline the action.

The rules of civil procedures will generally provide the legal framework applicable to court jurisdiction.

In arbitration proceedings, the parties decide the arbitration venue and jurisdiction.

The parties have the freedom to determine where the arbitration proceedings will take place and who will have jurisdiction to decide on the matter.

Recommended article: What is fiduciary duty

Legal Costs

The question of legal cost is a little more difficult to answer as it really depends on the case.

Many are of the view that filing a lawsuit before civil courts will be more expensive for the parties as they are required to pay expensive lawyer fees, expert fees, court fees, and assume other costs.

Even though the parties do not pay for the judge or jury’s time dealing with the matter, civil lawsuits tend to be very expensive.

A party can potentially win in the first instance but then have to spend more money if it wants to go to appeal or the other party takes the case to the appeal courts.

On the other hand, arbitration proceedings are desirable as it represents an alternative dispute resolution method where the parties have more control and may potentially pay less.

Although parties may still end up paying for lawyers and the arbitrator’s time, since the judgment is final, the parties will not have to spend money dealing with appeal proceedings.

Overall, however, arbitration fees can still go up fast if the parties are unable to agree on the proceedings and do not have proper communication.

Legal Process Speed

Many are of the view that exercising legal rights before the court is not only costly but also takes a long time.

Unfortunately, when parties are required to go to trial, their case may remain pending before the courts for years.

On the other hand, arbitration proceedings can be faster than litigation before the courts, relatively speaking.

It is not to say that arbitration proceedings will not take time, but in most cases, they can be resolved faster than the same action filed before the court.

Attorney Representation

Litigation and arbitration are different with respect to the use of attorney or attorney representation.

If you file a case in civil courts, most parties will need the help of a qualified attorney who understands the foundation of the case but also the applicable rules of civil procedures.

It’s important that parties respect the court rules to avoid harming their case.

As a result, most people will hire attorneys to represent them.

In arbitration, you are not necessarily required to have an attorney depending on how your arbitration proceeding is structured.

However, since the arbitrator’s judgment is firm and final, it may be best to have an attorney represent you.

Appeal

Another key difference between litigation and arbitration is your ability to appeal the judgment issued.

In civil courts, parties have the right to appeal the decision in many cases.

If a party does not agree with the trial judge’s decision, it may file an appeal against the judgment.

On the other hand, arbitration judgments are firm and final.

This means that once the arbitrator renders a final judgment, the case is definitively resolved and the parties cannot challenge the decision on its merits.

Recommended article: What is issue preclusion

Takeaways 

So there you have it folks!

What is the difference between litigation and arbitration?

In a nutshell, litigation and arbitration are two different methods that can be used to resolve a dispute.

Litigation typically has the following characteristics:

• It is a public procedure
• Judges are assigned by the court
• It can take longer to resolve
• Parties have the right to appeal
• It can be expensive 

On the other hand, arbitration is an alternative dispute resolution method having the following characteristics:

• The proceeding is confidential and private
• The arbitrator is selected by the parties
• The arbitrator will typically be chosen based on expertise
• Arbitration is generally faster 
• The judgment is final and cannot be appealed
• Arbitration may cost less if parties can agree on certain things and have good communication

Now that you know the key differences between litigation and arbitration, good luck with your research!

You May Also Like Related to Litigation vs Arbitration Differences