Arbitration vs. Court Litigation - What are the Pros and Cons?
Advantages and Disadvantages of Using Arbitration Over a Court Trial
Last Updated: May 26, 2016
As with just about anything in life, there are pros and cons to using either one of these dispute resolution forums. While some people may prefer arbitration, some may feel a court trial is the only way to handle litigation. Beside having a personal preference, there are some concrete reasons why one forum may be better than the other. Knowing the pros and cons of each will help you to make a decision as to which method is right for your civil case.
What is Arbitration?
We all know what a court hearing or trial is all about. So, unless you have been living under a rock, every one of us has either seen a court hearing on television or participated in one. But not everyone is familiar with what arbitration is. By definition, arbitration is a private, judicial determination of a dispute, by an independent third party. In layman's terms, an arbitration hearing is where a dispute between two parties is resolved by an independent person, or arbitrator. An arbitrator hears both sides of a dispute and makes a ruling based on evidence and testimony presented at the arbitration hearing. An arbitration hearing is informal and decided rather quickly.
Pros and Cons of Arbitration Compared to Court Litigation
Costs: Unlike a court trial, it is not necessary to hire an attorney to represent you. This is because arbitration does not involve time-consuming and expensive discovery, subpoenas, or interrogatories. Not hiring an attorney at a cost of over $300 an hour is definitely a money saver. The only draw back of not hiring an attorney, is that you will have to do all the work yourself. So be prepared to put in some time to put your case together.
Time: Arbitration is typically a speedier resolution process than a court trial. An ordinary lawsuit can take upwards of a year or more from initial filing to the trial. In comparison, an arbitration hearing can be over in 3 to 6 months from initial demand. So, if you want the matter handled quickly, arbitration is the way to go.
Flexibility: Court litigation is controlled by statutory and procedural rules. Judges are very strict in adhering to these rules and if you break one, you can get your case thrown out of court. On the other hand, arbitration rules are established by mutual agreement of both parties as to the submission of evidence, calling of witnesses, and the manner in which the hearing with be conducted.
Arbitrator or Judge: The soundness of any hearing is largely dependent on the quality of the judge or arbitrator hearing the case. In a court hearing, the judge is assigned by the court without any input from either party involved. And, multiple judges may be involved in adjudicating pre-trial disputes. In contrast, in an arbitration hearing, the arbitrator is selected by the parties involved and this arbitrator presides over the entire hearing.
Expertise: Arbitrators are selected from a pool of professionals who typically have experience in the area in which the dispute has arisen. This experience gives an arbitrator a greater capability to comprehend the issues at hand, more so than a trial judge.
Privacy: A court hearing is open to the public unless the judge rules for a closed courtroom, which is highly unlikely in matters such as these. In contract, an arbitration hearing is not open to the public and the parties can agree to keep the proceedings confidential.
Right to an Appeal: Ordinarily an appeal from an arbitration award is permitted only on one of five narrow grounds:
- the award was procured by corruption, fraud or other undue means;
- there was evident partiality, corruption or misconduct by the arbitrator;
- the arbitrator exceeded his or her powers;
- the arbitrator refused to postpone the hearing or hear evidence, or improperly conducted the hearing; or
- there was no arbitration agreement.
Consequently, an award in an arbitration proceeding is rarely overturned, even if the evidence does not support the result. In a court trial, the losing party has a right to appeal to a higher court. The basis for the appeal can include alleged errors made by the trial judge as well as alleged mistakes made by the jury, including that the result is not supported by the evidence.
Enforcement of the Award: In an arbitration, the prevailing party can file an application with the local court to confirm the arbitration award and enter judgment. Once a court enters judgment, the award can be enforced just as any other court judgment, including garnishment of bank accounts and execution and seizure of assets. Unlike a court judgment, which usually allows the party to enforce the judgment within 30 days, an arbitration award cannot be enforced until a lawsuit is filed and a court formally confirms the arbitration award and enters a court judgment in conformity with the award. This process usually takes at least 90 days.
The decision on whether arbitration is better than a court trial is entirely up to what is important to you in resolving your dispute. In some cases, arbitration is the only method offered as per a contractual agreement. Either way, if you are heading into an arbitration hearing or a court trial, make sure you educate yourself on the procedures so you can come out the winner in the end.