Arbitration versus Litigation

Introduction

Human life is full of intrigues which usually cause situations when people can agree or disagree. People’s disagreements often cause different disputes. In case of such discussions, the subsequent necessary step is always to resolve them either through litigation processes or through arbitration. Unlike litigation process, in which the intention often comes from the disputants, the choice for arbitration is usually motivated by the third party, who in turn initiates mechanisms of connecting the warring factions in order to find a common ground in their conflict. Nonetheless, both approaches lead to resolution and restoration of peace and harmony regardless of the process duration. Current essay is a critical analysis of the assertion stating that as arbitration is a form of dispute resolution unattached to a specific forum, it provides more freedom to the parties than litigation does. This freedom concerns the respective decisions regarding the applicable law with respect to validity of the arbitration agreement, the main contract and the law which is applicable during the enforcement stage. It first compares arbitration and litigation before describing the advantages and disadvantages and, finally, the critical analysis based on a personal perspective.

Arbitration versus Litigation

Litigation refers to the process that is initiated between two opposing factions, which aims at enforcing or defending a legal right. It usually occurs before the jury or judge in court makes a final determination based on the arguments of the case by disputants but within provisions of law. Arbitration, on the other hand, refers to ‘private judicial proceedings that aim at making a determination of a dispute by an independent third party.’ It may involve the use of a tribunal or an individual arbitrator who provides an alternative to the court action but still resolves the dispute in a just and binding manner.

Unlike litigation processes, which are often lengthy, arbitration’s main principle is to expeditiously obtain a fair resolution of disputes in question by an impartial third party without imposing unnecessary expenses on the disputants. In such a case, ‘parties are free to agree on the manner of their dispute resolution without feeling intimidated by law enforcing agencies.’ Some common forms of arbitration are domestic versus international, institutional versus ad hoc and state versus private.

In most cases, people would opt to avoid litigation due to the fact that it is not only costly, but also time consuming, emotionally draining and unpredictable. The reason is that the result of the case completely depends on the judge or jury who holds the mandate to determine an outcome. This dynamics makes litigation inefficient, hence providing possibility for arbitration as an alternative and better method of dispute resolution. The costs incurred in arbitration are insignificant since there is limited use of attorneys as compared to litigation, where each disputant has liberty to get competent lawyers who would spend a lot of time gathering evidence in order to find good grounds for arguing the case. The evidence allowed is also more limited in arbitration than in litigation. Furthermore, the provision of appeal is not applied in arbitration as it is in litigation processes, where disputants are allowed numerous chances of appealing for a fair ruling.

The final and significant element is selection of arbitrators. This is only applied in arbitration where a panel of multiple arbitrators fulfil a role of a judge in litigation. Each disputant is allowed to suggest one arbitrator and both arbitrators will then jointly select the third one. Usually the number of arbitrators in a panel has to be odd in order to avoid chances of a tie while passing a verdict since the decisions are made through a majority vote. This system has increasingly become popular over the use of courts since the determination is often fair and satisfactory to both sides of a dispute. Furthermore, the disputants are usually allowed freedom to determine validity of agreement and even the laws that will guide the process. This eliminates the possibility of the outcome being biased. The litigation processes bestow all the freedom of determination on the judge or jury who may at times be externally influenced to make unfounded ruling. This shortcoming that often prompts unsatisfied parties to resort to appealing in order to ensure that their cases are heard by a different organ of the judicial system and more often former rulings would be revoked. Consequently, arbitration is a less confrontational approach of dispute resolution in which warring factions attempt to resolve their difference instead of relying on the judicial system which in most cases has proved to be inefficient, time consuming, and exorbitant.

Typical Steps to Arbitration

Usually, a standard arbitration would first require a claimant’s request for arbitration in which a comprehensive list of summary of claims is incorporated. These are compiled and forwarded to the respondent or opponent in the dispute. Upon a thorough scrutiny, the respondent also indicates any counter-claims with reference to the claimant. The claimant may be also obliged to reply to the counterclaims if necessary. The appointment of the tribunal or an arbitrator follows in cases where the two disputants are allowed a chance to identify an arbitrator, and both arbitrators are provided with opportunity to identify the third arbitrator.

Immediately after this exercise, the procedural hearing follows, in which the setting of steps and the timetable for arbitration is provided. At this point, both warring parties are enjoined in the formulation of the regulations that would ensure smooth and a successful arbitration process. Thereafter, the claimant is required to submit the full statement of the case, which is never contained in the request note for arbitration. Consequently, there, is the respondent’s full defence and counterclaim, which is not indicated in the response statement. Finally, the claimant is given an opportunity to reply and make a defence to counterclaim the response of the opponent.

At this level, the arbitrator begins making interjectory remarks in order to guide the process of arbitration till the end of the first session. Caution is always taken not to influence the thoughts of the disputants, but rather help them to confront the problem causing the dispute between them, and, consequently, find the corresponding solution. Arbitrators are always on oath to remain impartial and confidential towards the matters of the disputants. This provision assures privacy of disputants’ matters, hence allowing to unveil all the fact they deem necessary to be disclosed in order to help guide the proceedings. In addition, the fact that the proceedings are conducted in secrecy and according to the preference of the disputants ensures that this process continues with minimal interruptions by the public, especially the media. The number of sessions of arbitration is determined by the complex nature of the case and at the discretion of disputants. This means that the process through which the outcome of the case should be realised solely depends on the kind of exchanges between the claimant and the respondent.

Pros and Cons of Arbitration

Arbitration has been highly regarded as compared to litigation due to the following merits: first, the process is usually free from hostility since the parties are usually encouraged to cooperate amicably and peacefully. They are even jointly involved in the procedure of crafting the structure of resolution than in the litigation process where hostility among the disputants is often very conspicuous. The fact that the contribution of both parties is recognised neutralises any possible aggression because each side will feel well represented and fairly heard. This cultivates the reconciliatory mood providing possibility for the healing process to commence.

In addition, arbitration is usually cheaper than litigation since it is not complicated, and resolutions takes a very short time to be realised. The costs incurred cater for arbitrators’ services per day and perhaps attorneys who are hardly needed. Due to the expeditious manner, in which proceedings are executed, it is possible to decrease the cost to negligible levels that every party would not default to pay. This is the reason for which more people in the world are resolving to use arbitration in their quest for conflict resolution today.

However, owing to the informal nature of arbitration, the processes are very flexible since they are not confined to the formal system of working days and hours. Depending on the needs and availabilities of those involved, arbitration proceedings can be conducted any time, either during the weekend or evening hours. This arrangement enables the arbitrators to accelerate the process taking the shortest time. Concerning litigation, the process must be scheduled for weekdays, and the working hours are also restricted to 8.00 A.M. to 4.00 P.M. only. And given a backlog of cases that it deals with, the implementation of the process requires even more time than expected.

However, arbitration’s rule of evidence and procedures are often simplified, making it less stilted and easily adapted to the needs of the disputants. Therefore, there is no delaying and game playing tactics which are entrenched in convoluted rules of evidence, where the witnesses and large bundles of documents would be required. In arbitration, the facts can be substantiated even by phone, which greatly simplifies the process. Due to this provision, it is hard for the lawyers to find reason to be enjoined into arbitration cases since their role may be insignificant.

Lastly, the proceedings of arbitration are always conducted privately, and all the parties are often in agreement to safeguard the confidentiality of all proceedings as well as terms of the final resolution. This is suitable because some information belonging to either party might result in great embarrassment if it is revealed to the public. Due to this provision, the corresponding approach is more valued than litigation because it sustains the dignity of the disputants even if they search their way out of a dispute.

On the contrary, arbitration has also its drawbacks, which allows people to resort to other means of conflict resolution. The fact that the final resolution is binding the limits recourse in case arbitrator’s award is considered unfair by any of the disputants. In such a situation, it is difficult for the unsatisfied party to seek redress in the court.

In addition, arbitration usually provides unequal playing field, especially if the dispute is raised between the parties of unequal strengths regarding power and economic status, such as employer and an employee. In this situation, outright corruption may be involved into the process. Following the informality and flexibility of the proceedings, stronger parties in this case will always navigate ways of tipping the arbitrators in order to influence the outcome in their favour. Sometimes the parties may be coerced to append the signatures before a deal is finally unveiled; a situation that fully works in favour of the stronger faction.

Similarly, the objectivity in the process of choosing arbitrators is often questionable, especially when a decision maker is selected from a pool list, such that those who become favourites are often assigned cases to deal with. However, there are expressed fears that some of the arbitrators selected may be partial and hinder a just outcome of the process of arbitration. In addition, there are many national arbitrators who mostly market their services to the companies that provide them with credit cards. This casts a lot of the objectivity on the approach. Moreover, the fact that arbitrators may be chosen by a party within the industry may still be less objective since there could be a likelihood of them being biased in favour of the appointing group.

The cases in which there is lack of transparency are also a major concern for the parties involved in arbitration. The approach is considered to be highly susceptible to manipulation of arbitrators by the disputing factions since they lack formality of law and procedures. Due to the fact that the lawyers are not highly regarded in the system, there may be created a leeway for conventional laws to be flawed, especially if the warring parties are non-cognisant of their rights as entrenched into the law. The fact that some would prefer this approach for the sake of their matters being handled privately, many would actually lament that the process may be marred by biasness. Consequently, the matter would be very complicated for the party that may be dissatisfied with the outcome since the decisions generated through arbitration are hardly reviewed by the court.

Finally, the increased preference of this approach continues to inflate the cost, and it is predicted that the cost of arbitration would be higher over time as compared to the cost of filing a lawsuit. This situation is likely to hamper the procedures of getting justice because many people, who would prefer arbitration due to the fact that its advantages outweigh the court system, may be scared by the rapid rise in costs. 

Personal Arguments

Considering the aforementioned description of arbitration and the litigation processes, the following assertion may be considered correct. It states that as arbitration is a form of dispute resolution unattached to a specific forum, it gives parties more freedom than litigation to decide upon the applicable law with respect to validity of the arbitration agreement, the main contract and the law to be applicable during the enforcement stage. In arbitration proceedings, the disputants are often free to participate in the crafting laws that would determine the course undertaken to find a resolution to their conflict. The fact that the system is informal gives the disputants ample room where they can lose their fury through discussions. Talking and speaking is a prerequisite to inner healing of anyone who is aggrieved. This room is usually minimal in the court system.

In addition, the fact that disputants are given a platform to chart their course enables them to express themselves in a manner that would be clearly understood by the counterpart in order to prevent any misconception and misjudgement. Since the process of arbitration is flexible in its schedules, much time can be allocated for thorough deliberations. The court system usually lacks this quality due to its formal schedules and limited time to each case’s proceedings. For this reason, the plaintiff and the defendants would hardly get ample time to ventilate meticulously on their issues in a manner that is well understood by both members of the jury and the opponent.

Furthermore, the quality that disputants get through arbitration, which litigation cannot guarantee, is the friendly atmosphere which is free from any form of intimidation. Usually the public would tend to avoid the courts since they know their freedom to debate freely is hampered by the fact that the final decision depends on the judge, and judges’ verdicts are never challenged. The arbitrators normally try to calm the disputants in order they say and challenge anything as long it is in compliance with their feelings. When one feels free to say anything he feels, it will make the process of resolution very easy and manageable because all reservations would be unveiled for deliberations. The disputants would also explore all possible mechanisms to argue their cases competently without fear of being misinterpreted of misunderstood. For this reason, arbitration does not normally require lawyers to argue the cases on behalf of the disputants because clarifications can be expressed as often as possible to allow every participant to understand the case regardless of the revealed facts.

Litigation procedures are more entrenched in the formal law and are suitable only for determining criminal cases but not civil ones. Therefore, they require lawyers, who can interpret the law competently, in order to argue the case within the stipulated time which would be difficult for a common man. Arbitration is suitable for determination of the civil cases, and unlike court systems, the disputants are involved in drafting laws to guide the process. This approach does not have a predefined system of laws according to which the proceedings should be conducted, such as in court, instead the laws are drafted before the commencement of proceedings based on the needs and conditions of the parties involved. When disputing parties are allowed this freedom they will be cautious to make rules that are not detrimental to their final expectations and the probability to be sincere during the process is also high. In case a situation arises where one party feels the other parties have digressed, an interjection can be immediately launched in order to correct the situation. Usually, ‘in litigation processes one would hardly comprehend the direction that proceedings would have taken since not all understand the law; its dynamics and the terminologies used’. Therefore, the disputants would always be kept in the dark and only rely on the lawyers’ interpretation after the proceedings would have been completed.

Conclusion

Due to the complicated nature of the court system and insufficient knowledge of the dynamics of law by many people in the society, the individuals involved in the disputes prefer using arbitration approach to that of litigation in order to resolve their conflicts. Many civil cases are enjoying this system of resolution because the outcome envisioned would always favour the involved parties and would also contribute to the lasting peace and conciliation between the warring parties. Litigation would be suitable for determining criminal cases, where the determination of such cases is based on the predefined laws. Moreover, there are no mutual benefits which are envisaged in the outcome of such cases other than the criminal to be prosecuted and imprisoned. The complications that are associated with litigation procedures are usually not inclined in long-term solution finding but present a way through which the parties involved can earn a livelihood. For example, the cost of hiring a lawyer has just escalated in the recent past due to high level of unemployment and increased crime rates. Lawyers have therefore taken advantage of the situation for their own convenience. Consequently, justice is never credible because the cases would require much time and funds, which would have been lost during the process leaving the disputants at no meaningful reprieve.