Litigation and arbitration are both binding forms of dispute resolution.
The main difference is that a judge or jury renders a decision in litigation while an arbitrator (or third party) decides the case in arbitration out of court.
When to use litigation over arbitration
You may want to use litigation if you have a strong legal case as judges or juries must strictly follow the law with their decisions. However, arbitrators have more leeway when making decisions.
Another reason to choose litigation over arbitration is that you have multiple levels of appeal. In arbitration, the decision is typically binding and often can’t be challenged.
Lastly, you may need to choose litigation if one of the parties is unwilling to go through arbitration.
When to use arbitration over litigation
Arbitration is often used over litigation when both parties prefer:
- A faster process
- To save on costs
- A private hearing that doesn’t require public court records to be filed
- A more straightforward, more convenient process and location that doesn’t depend on scheduling with the court
Additionally, arbitration can often be a more amicable process, which is helpful for business associates.
Lastly, sometimes arbitration must be chosen if it’s written into a commercial contract that parties will resolve any conflicts with arbitration over litigation.