Is it better to litigate or to arbitrate a business dispute?

Your business is involved in a dispute and your attempts to resolve it have gone nowhere. This means you are inevitably going to face a lawsuit, right? Not always. Arbitration is a valid option to consider before litigating.

In fact, if your dispute is based on a contract your contract may contain a provision mandating arbitration. Even if it does not, it is good to have a general idea of how arbitration compares to litigation.

Why choose arbitration?

Arbitration is generally speedier than litigation. According to the American Bar Association, on average it would take parties approximately seven months to complete the arbitration process. Compare that to traditional litigation, which can take anywhere from 23 to 30 months to complete. This means arbitration frees up time for your business to continue routine activities that turn a profit.

Arbitration often costs less than litigation. While you can be represented by an attorney in either case, your business saves on court costs and the other extended fees and expenses associated with a trial.

Arbitration is also a private process, compared to a trial which would become a part of the public record. What is said in arbitration stays in arbitration, which may make both sides more open to being honest with one another.

So, is arbitration always better than litigation?

It may be easy to assume based on the above situation that arbitration is always better than litigation. However, this is not always the case.

For example, while both an arbitrator’s decision and a judge’s decision are binding, litigation offers the option of appealing an adverse decision. There are no appeals in arbitration, and sometimes disputes arbitrated cannot then go to a trial if one of the parties disagrees with the arbitrator’s decision.

In addition, while the pre-trial process can be lengthy, it opens the door to out-of-court negotiations and a possible settlement that resolves the dispute quickly and in an agreeable manner. This can save your business time and money and may even restore positive relations between the parties.

Arbitration and litigation both have their benefits and drawbacks. Understanding the details of both processes can be key in ensuring you choose the dispute resolution process that best meets the needs of your business.