How can you choose between arbitration and litigation for conflict resolution?

The pivotal factor in choosing between arbitration and litigation lies in the initial requirement and agreement between parties. The choice between arbitration and litigation hinges on several factors, including the nature of the dispute, the parties' preferences, and the specifics of the contract involved. While arbitration offers flexibility and party autonomy, especially useful in international contexts, litigation provides a more traditional approach. Ultimately, the decision should be guided by a thorough understanding of each method's nuances and a strategic approach tailored to the specific needs of the dispute at hand.

To understand concepts it is important to identify where the word originates from. We trace "arbiter" to the Latin root of the same spelling, meaning “eyewitness, onlooker, or one that goes to something in order to see or hear it". The arbiter sees and hears without being seen himself. In effect, the arbiter makes his decision not according to formulas and the laws but by a personal assessment and in the name of equity. The arbiter is in fact a judge who acts as an arbiter. He/She judges by coming between the parties externally like someone who has been present at the affair without being seen, who can therefore give judgement on the facts freely and with authority, regardless of all precedents and in the light of the circumstances.

Based on my practical legal experience, I find that arbitration proceedings can be faster and more flexible. However, in terms of cost, since arbitration represents the Party autonomy of the chosen arbitrators, the expenses are naturally higher compared to traditional litigation in national courts. Therefore, when it comes to cost-effectiveness or cheaper, I believe it doesn't fully reflect the true nature of the process.

First of all, we need to understand the difference between conflict and dispute. In my view conflict can be public policy, political issues or any thing which is determintal to the resolution of the dispute between two parties privy to a Contract. If its a conflict than national courts will play a major role. And if its a dispute the resolution mechanism agreed needs to be adopted

All words have roots, the study of which is etymology, this helps in arriving at what the word actually means. Litigation comes from the root Latin word of "lis" which means "a strife or contention or to quarrel". That is what litigation is, a quarrel, before a forum that has set rules to determine who will win. It is no different then a gladiator match in certain respects so may not actually tend to arrive at a "just" conclusion but rather what the rules determine, which are designed in the spirit of justice but sometimes fall short of it. The word litigation does not include the idea of justice or arriving at a resolution, it is fundamentally a legal fight which is public. Hence it is at the dark end of the conflict resolution spectrum.

Key practical differences between arbitration & litigation are as follows: 1) Arbitration is cheaper - costs are fraction of the costs to go to court. 2) Arbitration is more private in nature - arbitration records are not public where as court proceedings and hearings are. 3) Length of process - Typically arbitration timelines does not exceed 1 year where as litigation can go on for many years if not decades until final conclusion. 4) Administrative complexity - Arbitration is more simpler filing, processing and arriving at a conclusion without the requirements of court filings which add administrative burden and hurdles. 5) Finality of decision - Arbitration has limited chances of appeal whereas court decisions often can be appealed.

One thing I find useful is to start by considering enforceability. Court decisions may not be enforceable offshore where as there are broad international treaties for the enforcement of arbitration awards. Useful to check the options. Another useful consideration is the type of expertise useful in a determination. Where two or more skill sets are needed (eg engineering and economics) it is more useful to try an arbitration where it’s possible to appoint experts based on skills and to have multiple experts. Do remember in an arbitration parties pay for the arbitrator, rooms and their advisers. Court can be more cost efficient!

I believe while considering the differences between arbitration and litigation it’s need and requirement for any settlement among parties ; the level of conflict , declaration and clauses in the binding documents , trust on the legal system and expertise of disputed parties determines the way forward and accordingly are selected. Sometimes arbitration not handled carefully may divert settlements towards larger disputes in future .

Honestly a key rule I always take in conflict resolution is start at the very top of the spectrum before you get to the bottom of the barrel of fighting it out in the courts. If you can negotiate between yourselves, well and good - couldn't be better. If that fails, get a 3rd party whom you both respect to facilitate mediation and if that fails go to a respected 3rd party who can arbitrate the matter saving you time, money and possibly even bad blood between you and your opponent. Resolving conflict in the least conflictious way is the best way: Winning without fighting. As Sun Tzu writes famously - "To win one hundred victories in one hundred battles is not the acme of skill. To quell the matter without fighting is the acme of skill."

Evidence is everything - this should have been documented before the conflict even took place in hindsight we realize this when it's too late. Data accumulation and gathering is important and throw it all in that is related to the conflict. Evidence rules often present hurdles when you try to throw something into evidence at a later stage. 2nd most important thing I would say is picking your counsel both for arbitration and/or litigation - can't emphasize this enough. Do NOT go on big names and firms, people realize this AFTER they lose big money on them. Hold an interview and gauge capability - it is often those who think outside the box and are passionate for your cause who will find one of the "146 ways" out of the situation for you.

Sometimes when the issues are few and only commercial considerations( Amounts )are to be decided a conciliation process is a third option . It is also much more flexible and also allows Quid pro Quo.In fact bigger disputes and heardening of Positions of the parties can be avoided through a series of Conciliations. Recording is through signed MOM between empowered persons. Thanks

An old Bhutanese proverb states - "Better to lose in the village then to win in the courts." Reflect on those words. Before even falling to the level of should we arbitrate or litigate - one should have already crossed-off the less confrontational approaches such as negotiation and mediation. If you have jumped to this conclusion between arbitration and litigation, this is not good at all. Minimize conflicts where they start - good-faith dialogue often leads to amicable solution without involving anyone and saves a relationship. Both arbitration and litigation are adversarial and thus will effect a relationship paradigm between parties in a negative way. Sometimes - no, almost ALWAYS there is more than to just winning, remember that.

Three things: First, I’m a lawyer, but I’m not your lawyer. For advice, hire a competent lawyer with proper licensure. Trying to save money with “free” internet-based legal advice has ruined lives. It really has. Second, one may have a choice between arbitration and litigation. Then again, maybe not. Disputes may be governed by a wide-variety of customs and practices; laws; and, agreements, etc. of which one is utterly unaware. Third. There are lots of dispute resolution methods and other complex options. Some may serve one’s interests better than others. One’s options may include, without limitation: arbitration, litigation, optional early mediation, private judge, and private trial, etc. in a variety of different places. Chose wisely.