INTRODUCTION
Disputes between humans are as old as civilization itself, energy-sapping, time-consuming and financially draining. Individual worldviews, shaped by unique experiences, and the diversity of interests, needs, and perspectives, create a foundation for disagreements. These differences, coupled with competition and clashing values, inevitably lead to disputes, whether in personal relationships, organizational settings, or international politics, and continue to influence the present day. While disputes are perennial, they should not be allowed to persist indefinitely, as they can disrupt societal peace and undermine the establishment of law and order. When disputes arise, individuals adopt different approaches to resolution, either formally, through litigation, or informally, through out-of-court settlement. However, should all disputes be resolved in the courtroom, or are some better settled outside it? This article will explore when arbitration is best suited for a legal dispute and when litigation should take precedence.
WHAT IS ARBITRATION?
Arbitration is a form of alternative dispute resolution in which parties to a dispute submit to the binding decision of a neutral third party acting in a judicial manner to resolve their claims and deliver a binding arbitral award, rather than to a court of law[1]. The persons to whom a reference to arbitration is made are called arbitrators.
WHAT IS LITIGATION?
Litigation refers to the process of taking legal action or resolving disputes through the court system[2]. It is a formal process for parties seeking justice, seeking to enforce their rights, and hold others accountable for unlawful actions. This process involves the pre-trial procedure, trial procedure, post-trial appeals and judgment enforcement. Although, litigation is usually considered as last resort for several reasons, including the fact that it is time-consuming and slows the administration of justice. However, it cannot be discarded as it remains a crucial aspect of maintaining legal order and upholding the rule of law.
The court prefers that parties resolve a dispute between themselves whenever possible, hence the provision of Rule 15(3)(d) of the rules of professional conduct 2023 amongst others, emphasizing the need for lawyers to inform their clients of ADR options before resorting or continuing litigation on his behalf. Where genuine efforts are not made to do this, a party can be penalized when ruling is made.
Determining whether arbitration or litigation is the right approach for resolving a legal dispute hinges on several factors. While arbitration is often preferred for certain commercial disputes, litigation is best suited for cases requiring a formal legal process. Below are reasons why parties to a dispute may decide to adopt the arbitration process of resolving disputes.
- Speed of Resolution
Time is of the essence in dispute resolutions, delays often amplify stress, escalate costs, and create prolonged uncertainty, adversely affecting the parties involved. Speed can be a decisive factor, especially in business settings where protracted legal processes can slow down operations. Litigation is often time-consuming and can stretch over years, especially when points of law are challenged, appeal is made, court calendar is overburdened, or due to formal court procedures involving multiple stages like discovery and trial. Arbitration expedites resolution by utilizing agreed timelines, fast-track options and binding decisions[3]. Therefore, when a client desires a swift resolution to a legal dispute, arbitration is often the best option.
- Control over the Proceedings
The control parties exert over proceedings significantly shapes both the outcome and experience of the dispute resolution. Arbitration grants parties exceptional autonomy by allowing them to select governing rules, opt for arbitrators with the right expertise and determine the venue and language. This ability to customize the process ensures it aligns with the specific needs and preferences of the disputing parties, thereby facilitating a more effective and efficient resolution.[4]
Litigation, however, is governed by strict procedural rules that are non-negotiable. These rules dictate all aspects of the process, from filing deadlines and discovery to trial procedures and evidentiary standards. Parties must adhere to these rules, regardless of their preferences or the specific needs of their dispute. Furthermore, parties have no control over the selection of the presiding judge, who is assigned by the court. They must accept the judge’s rulings, even if they perceive bias or a lack of relevant expertise. Similarly, the applicable law is predetermined by the jurisdiction where the case is filed. Parties cannot choose a more suitable legal framework. Unlike arbitration, litigation offers little room for customization. Parties cannot tailor the process to their specific needs, such as choosing a particular venue, language, or procedural timeline.
- Litigation is time-consuming
During Court trials, there is an opportunity to call many witnesses, subject to the judge’s discretion. This often leads to a lengthy examination and cross-examination process if the number of witnesses to be called is not limited by the judge or where there’s an absence of a cross-examination time limit. Evidentiary rules, while intended for fairness, prolong proceedings through objections, admissibility arguments, and witness preparation. Pre-trial discovery, including depositions, document production, and interrogatories, also consumes significant time and can be contentious thereby causing delay in proceedings. Expert witnesses often have very busy schedules, and it can be difficult to coordinate their availability with the courts schedule. Moreover, appeals significantly add to the time and complexity of litigation. Unlike the litigation process, arbitration sets limit for how many witnesses each side can call.[5]
- Confidentiality
A clear benefit of arbitration is its inherent privacy, as hearings are conducted privately, unlike court cases which are matters of public record. This confidentiality can be essential for parties who wish to keep sensitive information out of public eye. Businesses often have proprietary information, trade secrets, or sensitive commercial data that they cannot afford to disclose publicly. Arbitration provides a secure environment for resolving disputes without jeopardizing this information. Public litigation can damage a company’s or individual’s reputation, regardless of the outcome. Arbitration allows parties to resolve disputes discreetly, minimizing the potential for negative publicity. Since court proceedings are generally open to public, this method doesn’t offer the same level of privacy, which can be a concern in cases such as commercial or real estate disputes where confidential business information may be exposed.
- Decision-Making Process
When dealing with specialized fields such as intellectual property or commercial disputes, arbitration has an advantage because it allows parties to choose an arbitrator with extensive experience in that area. With litigation, judges are randomly assigned, which means the judge might not have specialized knowledge of complex or technical cases. This is especially important in contract disputes, where a sound understanding of the contractual terms can make a significant difference in the outcome[6].
- Cost
Litigation can become expensive not just because of legal fees but due to formal court procedures, discovery processes, potential trial expenses and the extended time it takes to reach a conclusion, which racks up costs. Parties may also incur fees related to court filings and other legal requirements. Moreover, additional costs are possible if an appeal becomes necessary, including further legal charges, the collection of record of proceedings, or consultation with more expert witnesses, substantially increasing the overall financial burden. While arbitration is generally not cheaper than litigation, it is often preferred because it is faster and more streamlined. By limiting the volume of documents exchanged and reducing the number of expert witnesses, costs can be controlled, but the primary advantage of arbitration lies in its speed and efficiency.
WITH ALL THE FACTORS POINTING TOWARD ARBITRATION AS THE BEST DISPUTE RESOLUTION OPTION WHY DO PARTIES STILL GO TO COURT?
While the importance of arbitration cannot be overstated, there are situations where parties may choose not to pursue arbitration as a means of resolving legal disputes. Litigation can be acrimonious, intrusive, and costly, yet, it’s an effective way to put an end to a dispute[7]. Below are some reasons why a party might prefer litigation over arbitration.
- Uncooperative opposing party
When an opposing party proves uncooperative and unwilling to engage in arbitration, litigation becomes the appropriate course of action, enabling the court to mandate their involvement in the legal process. Also, In the absence of a contractual arbitration provision, parties must resort to litigation.
- Appeals
One of the primary advantages of litigation is the ability to challenge the decision through an appellate review. While arbitration decisions are typically binding with limited recourse, litigation offers multiple levels of appeal, providing parties with the opportunity to challenge both procedural and substantive errors made at trial. In arbitration, appeal options are generally restricted to cases involving arbitrator’s error or misconduct.
- Setting legal precedent.
Litigation provides the opportunity to establish legal precedents, which can significantly impact future cases when a dispute is resolved through it. It is conducted through formal court proceedings, creating a public record. These records, which are accessible to the public, are not considered confidential and can be reviewed by anyone, as a result, they serve as legal precedents for future cases. Additionally, these public records can be used for educational and research purposes, contributing to the ongoing development of the law in the country. Court decisions set binding legal precedents that not only influence future cases but also play a key role in shaping the evolution of the law[8]. Furthermore, Arbitration is unsuitable for test cases seeking a binding judicial precedent, such as the legal interpretation of a statute or standard contract clause.
- Rules and Procedures
In arbitration, the rules, especially those around evidence, are usually less stringent, which can make the process less daunting. On the other hand, litigation has a strict playbook of procedural rules, which makes the process more structured. It can also be harder for a witness to be compelled to attend an arbitration hearing[9]. Evidence plays a vital role in litigation proceeding as all facts are proved with the aid of evidence. The presence of strong evidence significantly enhances a party’s position against its opposition. In the case of arbitration, the evidence is given less importance, as the main motive of arbitration is to solve the dispute by reaching a common ground rather than winning or losing[10].
- Risk Assessment
A thorough risk assessment helps to evaluate the potential risk and rewards of both arbitration and litigation. This includes the likelihood of success, the strength and weakness of the case, potential risk, Enforceability of judgments and possibility of appeals. Risk assessment is crucial for lawyers when advising clients on whether to choose arbitration or litigation. The potential for settlement is greater in arbitration due to its less adversarial nature. Furthermore, while litigation’s public nature can damage reputation and relationships, arbitration can preserve them. By considering these factors, lawyers can guide clients toward the best dispute resolution option[11].
- Judicial Relief
Another instance where litigation is preferred over arbitration is when the opposite party is at fault for medical or monetary or any kind of damages. Also, in cases of negligence or when party is seeking for an injunction, litigation is often preferred.
- Non-Arbitrable matters
The Arbitration and Mediation Act 2023 does not define which disputes are arbitrable. However, it has been judicially recognized as a matter of public policy that certain matters are not arbitrable. These include crime, divorce and marriage related matters, company winding up, and bankruptcy. An indictment for a public offense cannot be subject to an arbitration agreement. Similarly, disputes arising from illegal contracts or agreements void due to gaming or wagering are not arbitrable. Additionally, disputes leading to a change of legal status, such as divorce petitions, or matters relating to child custody, cannot be referred to arbitration.
In conclusion, while arbitration offers numerous advantages such as speed, flexibility, and a more streamlined process, it is not always cheaper when compared to litigation. The decision to pursue arbitration or litigation hinges on the unique circumstances surrounding each dispute, the priorities of the involved parties, and the legal framework that governs the issue at hand. Arbitration may be ideal for parties seeking a faster resolution with a more private and less formal process, but it can come with its own set of challenges. For complex issues, such as those involving judicial reliefs, intricate legal principles, or public policy concerns, litigation may be preferred due to its ability to provide a more thorough examination of the case and create precedent. Understanding the unique circumstances of each case helps make a more informed decision on the dispute resolution procedure to resort to when resolving a legal dispute.
[1] Arbitration in law: Definition, Benefits and Process, Study.com,<https://study.com/learn/lesson/what-is-arbitration-law.html#:~:text=Arbitration%20is%20a%20process%20that,legal%20dispute%2C%20and%20award%20damages.> accessed at April 2, 2025
[2] Litigation and Alternative dispute resolution, University of Cincinnati College of law, https://law.uc.edu/education/areasofstudy/litigation-alternative-dispute-resolution.html#:~:text=Litigation%20is%20generally%20thought%20of,arbitrator’s%20decision%20is%20usually%20binding.
[3] Arbitration vs Litigation, Summit LawLlp <https://www.summitlawllp.co.uk/arbitration-vs-litigatio/ accessed on March 31, 2025
[4]ibid
[5] 11 Key differences between Arbitration vs Litigation, 2023,Lincoln&Rowe.<https://lincolnandrowe.com/2023/07/17/11-key-differences-between-arbitration-vs-litigation/> accessed on March 31, 2025
[6] Arbitration vs Litigation: choosing the right path, 2024, Pepperdine law blog https://law.pepperdine.edu/blog/posts/arbitration-vs-litigation-choosing-the-right-path.htm#:~:text=Flexibility,parties%20to%20tailor%20the%20process. Accessed on 30 March 2025
[7] T. Reuters Arbitration and litigation- Legal glossary, 2023<https://legal.thomsonreuters.com/blog/arbitration-vs-litigation-the-differences/#arbitration<accessed on 30 march, 2025
[8]S. Patel, Arbitration vs Litigation, 2024 https://blog.ipleaders.in/arbitration-vs-litigation/> accessed on March 31, 2025
[9] ibid
[10] ibid
[11]Arbitration vs Litigation: Making the right choice, 2023 LexisNexis https://www.lexisnexis.com/community/insights/legal/b/thought-leadership/posts/arbitration-vs-litigation?srsltid=AfmBOopWQc8S22TQg8U0uOnnCs7I_5HgNChSdCmiEN2QO9EgbDkpQIbe
accessed on March 31, 2025