Arbitration vs. Litigation: Benefits for Commercial Dispute Resolution

This essay provides a comparative analysis of arbitration and litigation as methods for resolving commercial disputes, highlighting the key advantages of arbitration. It defines both arbitration and litigation, emphasizing that both serve as non-consensual dispute resolution methods. The essay underscores arbitration's advantages in cost-effectiveness, privacy, decision-making, and technical expertise, particularly in contrast to traditional litigation. It details the arbitration process, from initial pleadings to final decision-making, and emphasizes the crucial roles of neutrality and timing in resolving disputes efficiently. Ultimately, the essay argues that arbitration offers significant benefits over litigation, especially in its ability to provide unbiased decisions and faster resolutions, making it a preferred method for settling commercial disputes.

Law

TABLE OF CONTENTS
Law..................................................................................................................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Understanding Arbitration and Litigation along with their comparison.....................................3
Overview of the process of arbitration........................................................................................4
Two key benefits of arbitration over litigation for commercial disputes....................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Arbitration has been referred as the procedure through which dispute has been submitted by
the agreement of parties to the arbitrators and then, arbitrators makes the binding decision in
order to solve the dispute among the parties. Thus, it is the private dispute resolution in which
the confidentiality of the parties is being maintained. Whereas, litigation is the legal procedure
under which the parties approach the court in terms of settling the dispute. In litigation, the
confidentiality of the parties is being not maintained as the dispute have been settled in the court
1. Both the procedures are concerned with settling of disputes. However, the way of settling the
dispute is different. It The present essay will lay the emphasis upon major two benefits of the
arbitration over litigation in order to resolve the commercial dispute. Also, the overview of the
process of the arbitration will be highlighted.
MAIN BODY
Understanding Arbitration and Litigation along with their comparison
Arbitration is the method for resolving the dispute under which the third party which is
often neutral party has been appointed which is called arbitrator. The third party studies the
dispute and provide guidance to both the parties between whom dispute has been arisen. On the
other hand, litigation is referred to the legal process in which the court settles the dispute
between the parties. Thus, Arbitration and litigation helps in the dispute resolution, dispute
resolution is of further two types which includes Consensual dispute resolution and Non-
Consensual dispute resolution 2. The non-consensual resolution is mainly based on the final and
the binding determination with the help of the independent or third party which is litigation and
arbitration. Hence, both of them are used for the non-consensual dispute resolution.
In traditional pattern, arbitration is being perceived in context of having certain advantage
over the litigation which involves, cost, privacy, decision making and technical expertise. The
Victorian and the new South Wales court have introduced the specific procedure in order to deal
with the disputes. The judges who are specialised in a particular field looks upon the case which
1 Spencer, D. Principles of Dispute Resolution, 3rd edition, Thomson Reuters, 2020
2 Denton, David H and Michael DG Heaton, ‘Commercial Arbitration – Does it really
have a future?’ (2014) 4(1) Victoria University Law and Justice Journal 117

is related to their field so, advantage of technical expertise can be involved in litigation as well.
However, the technical expertise is higher in the arbitration in comparison of the
litigation as the arbitrator is highly expertise. In terms of privacy also arbitration provides
confidentiality to the parties and no disclosure of the personal information of the parties has been
done. However, court has been contrast in this context as the confidentiality of the parties has not
been maintained in effective manner in the court. Arbitration hearing takes place faster in
comparison of the litigation as the hearing is depends upon the parties. As soon as both the
parties are ready the hearing has been take place. Whereas, litigation involves lengthier process
which involves the series of steps such as- pleadings, discovery and permitting the council for
the representation of the parties 3. The arbitration is the private form of resolving the dispute and
therefore, the parties has to pay to the arbitrator for resolving their disputes. Involving the
confidentiality clause in the agreement is highly mandatory as it helps in maintaining the
confidentiality Otherwise, there is threat of the disclosure of the information. Thus, Arbitration
helps in solving the dispute in effective manner and however, there are certain disadvantages of
arbitration. However, the advantages are more in comparison of litigation. Therefore, it has been
determined as the appropriate way of resolving the dispute.
Overview of the process of arbitration
The major advantage of arbitration is linked with its procedure. The procedure is easy and
faster than litigation that helps in resolving the dispute in effective manner. The arbitrator and
partied meets personally and hearing has been take place under which both the parties presents
their argument along with the evidences in order to support their cases. Afterwards, arbitrator
takes the decision and provides recommendation to the parties and the render has been written
and final decision has been taken. The decision has been made final only when both the parties
becomes agree over the decision. Thus, in this manner the dispute has been resolved with the
help of arbitration.
In Australia, Under Article 5 of the UNCITRAL model law supports the jurisdiction in
which court supports the arbitration. Australia has adopted the important binding arbitration
3 ? Martin, Wayne, ‘Alternative Dispute Resolution – A Misnomer?’ (Speech, Australian
Disputes Centre, 6 March 2018)

under the part VI of MLI 4 Those case that comes under the subject of court are not eligible for
arbitration. The parties can be involved in the process of arbitration in three ways and those are-
Judicial arbitration, contractual arbitration or the stipulation. The non-refundable registration fees
of arbitration cost A$2,500 and the major amount is depending upon the dispute. The neutral
decision maker takes the decision that helps in solving the disputes. There is no favour has been
given to any party while resolving the dispute and therefore, the decision has been taken in
effective way.
The procedure of Arbitration gets starts with the initial pleadings in which the case of the
party has been sent to the arbitrators and party itself selects their arbitrators and final hearing has
been take place. In the final hearing session both the party put their issues along with the
evidences and the neutral decision makes hears it and provides them recommendations. There is
no chance of partiality with the parties in this process as it helps in settling the commercial
dispute in most effective manner 5. Also, effective mutual understanding has been developed
among the parties after the resolution of the dispute. The arbitrators try to understand the
situation of the parties and that decision has been taken out which can assure benefit to both the
parties. In case, it is assuring benefit to one party then also it is important that both the parties are
agree over this.
Two key benefits of arbitration over litigation for commercial disputes
Arbitration is providing numerous advantages in comparison of the litigation. This is an
alternative process to the court system in which the dispute has been solved by the experienced
person. The commercial disputes among the parties arises on a high note and arbitration helps in
resolving the commercial disputes in most effective manner. There are certain benefits or
arbitration which are- less costly, easier process, privacy, neutrality, limited right of Appeal and
enforceability. However, when it comes to cost it has been often said that arbitration is cheaper
than litigation. But, the cost of room hiring, registration fees and so on elements makes it costly
4 Wakefield, John and Narkiewicz, Katrine ‘Australia’s new arbitration regime: Five years
on’ (4 February 2015)
5 Sourdin, Tania, Tony Burke, and Bin Li. "Just, quick and cheap?: Civil dispute
resolution and technology." Macquarie Law Journal 19 (2019): 17-38.

and therefore, in some areas it becomes costly due to additional costs. Besides this, there are
many advantages has been provided by the arbitration in comparison of the litigation.
The major two key benefits of the arbitration over litigation for the commercial disputes
are affiliated with the Neutrality and Timing. In Arbitration procedure the key advantage is of
neutrality while taking the decision. The parties itself selects the arbitrators so, both the parties
have their confidence in the arbitrator which create no sense of partiality in them. Therefore, at
the time of hearing people shares everything with arbitrator and even they do not feel any type of
hesitation. Thus, this is the best attribute that can be witnessed in the arbitration process. With
the help of neutral decision maker, the decision have been taken that creates confidence in the
parties 6. The unbiased decision helps in resolving the commercial dispute in most effective
manner. When it comes to commercial disputes, it is important that, decision that has been taken
should be impartial and unbiased and this can be assured with the help of the arbitration
procedure.
Both the parties and arbitrator seats in a same room and arbitrator starts the conversation.
Afterwards, each of the member shares their issues and reason why the dispute has been arising.
The arbitrator takes complete information from both the person so, the proper situation can be
known. However, details of the case are already being known by the neutral decision maker. But,
it is important to take the information from their client as well. It helps in understanding many
things. Arbitrators mainly focuses on the cause of the dispute and on the basis of that the major
reason has been known. Afterwards, the decision has been taken upon which both the parties are
agree. Therefore, it has been said that arbitration supports the unbiased decision and impartiality
as the neutral decision has been taken which depicts the justice. Therefore, this has been
determined as one of the key advantage of arbitration as there is no partiality has been performed
while taking decision.
The another key benefit of arbitration in relation of commercial dispute is related to the
timing. It is fast procedure which helps in closing the case and resolving the dispute. The
average time in order to filling to the decision is about 400 days whereas in litigation it takes 18
months to three years. Thus, it proves that arbitration is faster than litigation and therefore, it
6 David Palser, Mallesons Stephen Jaques, Solicitors, Melbourne. “Arbitration v
Litigation” ACLN - Issue #47 2016
.

helps in saving time, resources and energy. The major element is that the case is closed in less
time within maintaining peace while hearing takes place. The arbitrator assures proper focus that
no one can gets angry and the peaceful environment has been maintained. In commercial dispute,
it is important that decision has been taken in fast manner do, the further things can be take
place. If it takes time, then it creates issues for the parties itself.
There are simplifies rules of the evidence and procedure in the arbitration procedure and
therefore, it is faster than litigation. There is lack of time has been consumed in the submission
of documents whereas in litigation it takes more time. The rules are highly simplified in the
process of the arbitration which makes it easy in context of taking decision 7. The another reason
behind the effective timing of arbitration is associated with the lack number of appeals. In the
process of litigation there are numerous appeals have been made by the court which makes it
lengthier process and therefore, it creates problems for the parties who are involved in the case.
Also, the lengthier process leads to create high cost in litigation procedure.
Thus, it has been proven that, procedure of the Arbitration is brought on quick hearing. It is
based on the availability of the parties. If the parties are available on time then, the decision has
been taken fast. However, in litigation it is not like this. It takes lot of time for taking the
decision due to the number of appeals has been made. It has been found from various studies
that, federal and state court in the New South Wales are having case management regimes which
is helping in reducing the delays before the hearing 8. However, in comparison of the Arbitration
it takes lot of time. In context of solving the commercial dispute, Arbitration is highly effective.
It offers numerous benefits but the key benefits are associated with the unbiased decision in less
timing. The less time has been consumed and both the parties becomes agree on the final
decision and the dispute has been resolved. Thus, arbitration has been proven efficient enough in
solving the commercial disputes in comparison of litigation.
7 Gough, Mark. "A Tale of Two Forums: Employment Discrimination Outcomes in
Arbitration and Litigation." ILR Review 74. no. 4 (2021): 875-897.
8
8 Born, Gary B. International arbitration: law and practice. Kluwer Law International BV,
2021

CONCLUSION
The above essay has concluded that, Arbitration is the effective in comparison of litigation
for solving the disputes. Also, it has been found out that, Arbitration keeps the confidentiality of
the parties who are involved in the process of dispute resolution whereas in litigation the
confidentiality of the parties has not been maintained. Arbitration takes less time in terms of
solving the dispute, it is faster than litigation. Also, it is highly flexible therefore, the dispute
resolution process becomes more easy and faster. There are limited resources required in the
procedure of arbitration. Thus, the final conclusion that is being arrived from the assessment is
that arbitration contains more benefits than litigation and therefore, it has been considered as
highly effective for solving the dispute.
REFERENCES
Books and journals

Born, Gary B. International arbitration: law and practice. Kluwer Law International BV, 2021
David Palser, Mallesons Stephen Jaques, Solicitors, Melbourne. “Arbitration v Litigation” ACLN
- Issue #47 2016
Denton, David H and Michael DG Heaton, ‘Commercial Arbitration – Does it really have a
future?’ (2014) 4(1) Victoria University Law and Justice Journal 117
Gough, Mark. "A Tale of Two Forums: Employment Discrimination Outcomes in Arbitration and
Litigation." ILR Review 74. no. 4 (2021): 875-897.
Martin, Wayne, ‘Alternative Dispute Resolution – A Misnomer?’ (Speech, Australian Disputes
Centre, 6 March 2018)
Sourdin, Tania, Tony Burke, and Bin Li. "Just, quick and cheap?: Civil dispute resolution and
technology." Macquarie Law Journal 19 (2019): 17-38.
Spencer, D. Principles of Dispute Resolution, 3rd edition, Thomson Reuters, 2020
Wakefield, John and Narkiewicz, Katrine ‘Australia’s new arbitration regime: Five years on’ (4
February 2015)