5 Major Differences between Arbitration and Litigation

When we think of legal disputes, most of us probably imagine expensive, stressful, and time-consuming court cases that don’t always guarantee a satisfactory outcome. Fortunately, you don’t have to negotiate and conclude your legal disputes in court. Alternative Dispute Resolution processes like arbitration offer parties in conflict a different way to resolve their differences. 

However, in a recent Government call for Evidence on Dispute Resolution in England and Wales, respondents pointed to parties’ lack of awareness about the availability of different dispute resolution processes due to lack of public information or resources. 

In this article, we take a look at the relative advantages, disadvantages, and differences between arbitration and litigation to demonstrate why considering an ADR path is worthwhile. 

If you’re facing a legal dispute, explore your options with our dedicated litigation & arbitration teams. 

What is Arbitration? 

Before we compare arbitration and litigation, we need to understand how the two processes work. 

Arbitration is a method of ‘alternative dispute resolution’ (‘ADR’). It is a way of resolving a legal dispute outside of court. Arbitration involves three parties: 

• Claimant. The claimant is the person who brings the claim against the respondent. 
• Respondent. The respondent is the ‘accused’ party. 
• Arbitrator. The arbitrator is an independent third party who determines the arbitration process by examining evidence and settling on an outcome. 

As per the Arbitration Act 1996, the aim of arbitration is to ‘obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.’ 

The final decision in an arbitration process known as an ‘award’ and it is legally binding. It is usually difficult to appeal the outcome of arbitration. 

How does Arbitration work? 

An ‘arbitrator’ orchestrates the entire arbitration process  – they are the independent third party we mentioned earlier. 

The arbitrator sets out the process through which the claimant and respondent can submit their claim and evidence. Arbitration can be carried out whenever and wherever the parties want. Sometimes, the arbitrator is able to reach a conclusion without face-to-face meetings. Depending on the case, the arbitrator may also request in-person meetings with the respondent and claimant. 

The disputing parties are free to agree how they will resolve their disputes. But the Arbitration Act 1996 does provide ‘non-mandatory provisions’ for where they are unable to agree. 

After considering the evidence, the arbitrator decides on an outcome and makes an ‘award’. 

What is Litigation? 

Litigation is a legal process through which one party takes legal action against another in order to resolve a dispute. It is the ‘default method for resolving large commercial disputes in England and Wales’. 

However, litigation is emphasised as ‘the last resort’. Disputing parties are required to at least consider ADR  such as negotiation, mediation or arbitration before they commence legal proceedings in court. 

Litigation is governed by a set of rules called the Civil Procedure Rules. These rules try to ensure that cases are dealt with in a way that: 

• Makes sure all parties are on ‘equal footing’
• Saves expense
• Is proportionate to the specific circumstances of the dispute 
• Streamlines timelines and is as efficient as possible 
• Requires only the appropriate amount of the court’s resources 

Disputing parties are also expected to have explored ADR before deciding on litigation. 

Pre-action Protocol 

All parties are legally required to follow ‘pre-action protocols’ before they head to the courts.

Pre-action rules are designed to try and encourage disputing parties to come to an agreement outside of court. As per the Practice Direction (Pre Action Conduct and Protocols) , parties are expected to have taken appropriate steps  to: 

• Understand each other’s positions
• Make decisions about how best to proceed
• Tried to have settled the issues without proceedings
• Considered a form of ADR to assist with settlement 
• Worked to minimise the costs of dispute resolution 

Arbitration vs Litigation: 5 Key Differences 

Here are the key differences between arbitration and litigation. 

1. Cost 

Arbitration can be cheaper than litigation. Initiating legal proceedings will involve a court fee and solicitors and barrister’s fees, which can often be far more costly than anticipated especially if the case takes longer to resolve than expected. 

2. Length of process

Using arbitration often means that legal disputes are resolved far more quickly. In comparison, litigation can take much longer because of delays in the court system (exacerbated by Covid 19)

3. Administration & stress 

Arbitration timelines can be shorter and the dispute can therefore be resolved more efficiently. Plus, the parties can to agree on how they want the case to be handled rather than under strict court rules.

Additionally, going to court can be emotive and damaging to the relationship between the two parties. Arbitration can be a less contentious method of resolving a dispute. 

4. Private vs Public 

Arbitration is a private process, whereas litigation is public. This means that litigation is a totally open process and court proceedings are accessible to anyone that wants to attend them. By contrast, there is no public record when it comes to arbitration. 

5. Ability to appeal 

Arbitration offers the disputing parties more ‘finality’ because ‘under English law, successful challenges to arbitrators are relatively rare.’ Decisions made by a judge during litigation are appealable. 

6. Dispute Resolution Clauses 

By including what is known as a ‘dispute resolution clause’, contracting parties can voluntarily agree to settle potential legal disputes using arbitration rather than litigation. 

Which one to choose? 

The pre-action protocols stipulate that disputing parties are expected to try and resolve their issues outside of court, possibly via ADR like arbitration. Given the minimised cost, stress, and duration of proceedings that arbitration offers, it is worth considering this as an attempt  to resolve legal disputes this way. 

Our dedicated dispute resolution team offers extensive experience handling complex and sensitive matters with care and efficiency. We can support you through arbitration and/or litigation, whatever your circumstances. Get in touch to find out more about our services

FAQs about Arbitration and Litigation

1. Does the UK have arbitration? 

Yes, arbitration is a form of ADR (alternative dispute resolution), and is a process that disputing parties can consider before they go ahead with court proceedings. 

2. Is Arbitration binding in the UK? 

The arbitrator’s decision is legally binding.  

3. Who pays for arbitration in the UK? 

Typically, disputing parties will share the costs of the arbitration process. Though the arbitrator may order one party to cover the costs of the other and you would typically expect the losing party in an arbitration to be ordered to pay the costs incurred by the winning party.

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