Arbitration- Litigation Choice Not Always Obvious

Despite its many perceived advantages, arbitration should not necessarily be the default method for solving corporate disputes. Rather, when choosing between arbitration and litigation, counsel should make a careful and informed decision.

Both methods involve the same elements, for the most part, and they embody many of the same fundamental concepts. For example, witnesses testify and are cross-examined, evidence is submitted, and opening and closing statements are made. Both arbitration and litigation also involve motions practice and varying forms of discovery, and protective orders are available and enforceable in both forums.

At the same time, one noticeable difference is that in arbitration the parties must pay someone to resolve the dispute. Arbitration, including administrative fees, are no small cost, especially when there are complex issues and a panel of arbitrators.

Often it takes the same amount of time and expense to resolve a dispute through arbitration as it does through litigation. On the other hand, an advantage unique to arbitration is its ability to shield disputes from the public eye. There are generally no public “dockets,” and most arbitration clauses expressly call for confidential proceedings.

If you determine that arbitration is the best way to resolve the dispute, it’s important to make sure that the arbitration agreement completely defines the ground rules. If you think it will be advantageous to limit the number of witnesses or even the days of the hearing itself, include language to that effect in the agreement.

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