This Article is written by Jayash Agarwal, a Third-year law student of GLS Law College, Ahmedabad

INTRODUCTION

Litigation and Arbitration are some of the essential ways of solving conflicts that may exist between individuals or organizations. Each has its relative strengths and weaknesses, so to choose the appropriate procedure, it is necessary to know the features, one superior to the other. In this comparative analysis, it is important first to understand some of the main distinctions between arbitration and litigation.[1].

DEFINITION

Litigation is a traditional form of solving conflicts that is being practiced in all the courts around the world. It incorporates the process followed in court and actions, which can be legal or otherwise, taken to enforce or protect legal rights. In other words, it is a procedure of settling a dispute through the courts of law.

Whereas,

Arbitration is an extra-judicial way of solving disputes where a dispute is solved by one or more arbitrators chosen by the parties and should number an odd total. Arbitration is given a meaning known as “any arbitration, whether or not administered by permanent arbitral institution” according to Section 2(1)(a) of the Arbitration and Conciliation Act, 1996. In other words, any form of arbitration has been given legal right in India by the Arbitration and Conciliation Act, 1996, and falls under it.

It can be summed up that arbitration is a more effective and flexible process of litigation if such a solution is more favorable to the parties concerned and allows for faster results and greater control over the procedure.[2].

LEGAL PROCESS

Arbitration is generally a less complicated and time-consuming method of dispute resolution as compared to litigation. The parties involved can decide on a certain manner in which the arbitration process has to be followed, and the process is done in a closed manner. This also makes it easier and more efficient in the process of solving a particular dispute.

Litigation on the other hand is completely within the legal framework where the rules and procedures are determined by the court. This may result in a longer and more complicated process since both parties must stick to these rules as well as likely to face some schedule issues and other associated delays.

IS ARBITRATION BETTER THAN LITIGATION?

Another typical question that Advocates and law experts ask is whether arbitration is superior to litigation. Sometimes the answer as often in law is that it depends on the circumstances under which the crimes were committed and the parties involved.

Arbitration has several benefits which make this method of dispute resolution more or less preferable for some disputes.

v One advantage that can be underlined is that such systems can save a considerable amount of money. Arbitration unlike litigation is comparatively cheaper because it involves numerous procedures that are very mechanical.

v Further, arbitration can be time-saving as compared to normal court cases, normally, most court cases take many years before they are completed.

v Arbitration process is generally confidential and quasi-judicial proceedings while court cases are often in the public domain. That is particularly important to the parties that will need to withhold some information about their privacy.
Moreover, arbitration can be said to be versatile in that the parties can fashion the procedure according to their requirements. Small law firms consider this flexibility useful especially while handling special situations and cases[3].

Courts often recommend arbitration in various cases to ensure a more efficient and cost-effective resolution. Here are a few notable examples:

1. Smith v. Spizzirri (2024)[4]: The U.S. Supreme Court ruled that courts must stay proceedings pending arbitration if requested by a party, emphasizing the importance of arbitration clauses in contracts.

2. Coinbase, Inc. v. Suski (2024)[5]: This case clarified that conflicts between agreements regarding arbitration should be resolved by an arbitrator if the contract includes a delegation provision

WHY ARBITRATION SHOULD NOT BE CONSIDERED!

While arbitration is often viewed as a more efficient and flexible alternative to litigation, it is not without its drawbacks. Below are some key disadvantages of arbitration that parties should consider before opting for this dispute-resolution method[6],

1. Cost Considerations

Even though arbitration is always portrayed as being more cost-effective than litigation, the above cases demonstrate otherwise. Several factors can contribute to high costs in arbitration.

Several factors can contribute to high costs in arbitration:
Multiple Arbitrators: Where the circumstances are somewhat more complicated, the parties may wish to have more than one arbitrator in place and so appoint a group of them. This can considerably raise fees, as each of the arbitrators usually files his or her fee for the time and the degree of specialization.

Extended Duration: If the arbitration process takes time as a result of complicated questions or many hearings, expenses rise sharply. Other costs include: Expert witnesses; Preparation of documents and other formalities; Overhead expenses and any other expense that is incidental to the conducting of the trial.

Administrative Fees: Some arbitration institutions charge administrative fees which will make the cost incurred by the parties higher.

2. Limited Discovery

Discovery means the procedures through which the parties become familiar with information about the case or produce evidence in the course of the trial. In arbitration, the discovery process is usually more limited compared to litigation,

In arbitration, the discovery process is usually more limited compared to litigation:

Restricted Scope: The limits on discovery in arbitration proceedings are usually less broad which may present a challenge to the party to gather crucial evidence. This is especially so in cases that require lengthy documentation or witness deposition to be made for presentation in court.

Less Formal Procedures: Since arbitration is generally more flexible than litigation there may be fewer legal means at the party’s disposal to force discovery as in a court. This can result in difficulties in obtaining key information from the other party to a contract from the party that is in breach.

WHY CHOOSE LITIGATION OVER ARBITRATION?

However, more often than not, there might be cases where litigation will be the preferred mode of Advocates. Discourse also has other advantages that no type of arbitration can provide.

· Setting Legal Precedents
The following are some of the strengths of litigation over arbitration; One major advantage of litigation is the chance to establish laws. There are court decisions, which are legally constructively established as witnesses to future cases to the advancement of the law. Thus, if an attorney wants to make something bigger or has a view of the legal issue that has the potential to affect a large population, then litigation may be the best solution to go for.

· Uncooperative Opposing Party
The third circumstance as to why people opt for litigation is when the other side is unwilling to engage in arbitration. In such situations, all that the court system offers is a way of forcing the other party to answer and stick to a legal process.

Here below have been several instances where the courts of law have underlined the need to litigate to an extent. Here are a few examples:

Ford Motor Co. v. Montana Eighth Judicial District Court (2021[7]): The U. S. Supreme Court has decreed that when a company ships a product into a state to meet a demand for it, and the product gives rise to an injury in the state to a resident of the state, the state’s courts are available to hear the ensuing lawsuit.

Bristol-Myers Squibb Co. v. Superior Court of California (2017)[8]: It means that specific jurisdiction is absent where there are no connections between the forum and the underlying controversy irrespective of the scope of a defendant’s unrelated activities in the state.
These cases have indicated, how the courts have applied the doctrine to ensure that litigation is used appropriately in dealing with legal issues, particularly in matters about jurisdiction and the relationship of the parties to the forum state.

RESONS FOR NOT CONSIDERING LITIGATION![9]

Cost
Litigation can be prohibitively expensive due to various factors:

Court Fees: Costs for filing a lawsuit are another aspect that includes filing fees for starting legal action and costs relating to motions and appeals which can add up.
Legal Representation: Professional costs include the professional fees of lawyers that are hired especially in litigation and these are generally large because the more complex a case the more professional advice is needed.

Prolonged Proceedings: Disputes take respective years to be resolved because of the legal systems that are involved and this leads to high costs because both parties will still be bearing legal expenses among others for the trial period.

Time-Consuming

The timeline for resolving a litigation case can be significantly lengthy. The timeline for resolving a litigation case can be significantly lengthy,
Complex Legal Processes: All the procedures in a legal case can take time, starting with the discovery phase and pre-trial motions as well as potential appeals.

Court Backlogs: There are numerous courts, and most of them experience a backlog of cases hence the delays in hearings and trials. This can again delay any chance of getting to a resolution by a considerable amount of time.

Rigidity

The formal structure of litigation imposes certain limitations:

Inflexibility: Due to the set procedures and how legal systems are designed it may be quite a challenge for the involved parties to conduct the court process in a way that best suits their need. This approach may not allow for special features of a particular case which may require a little different handling.

Limited Options for Resolution: Whereas in arbitration or mediation the parties, the Advocates, or the third neutral may come up with fancy ways of solving the case or agree on a certain formula that will satisfy both parties, in most cases, litigation entails that the one who is right triumphs, and the wrong one is defeated.

CONCLUSION

Arbitration as well as Litigation has its pros and cons. The decision to hire one over the other depends on several characteristics which include the type of dispute, privacy needed, urgency of the case, and the possibility of an appeal. It is therefore important to draw a difference between arbitration and litigation as this enables the parties to arrive at a decision that best fits them in a given situation.

REFERENCES

· https://www.mhhplaw.com/arbitration-vs-litigation-a-comparative-analysis/

· www.thklaw.com/wp-content/uploads/2020/04/Arbitration-vs-Litigation-Business-Disputes.pdf

· ssrn_id3354674_code2703449.pdf (elsevier-ssrn-document-store-prod.s3.amazonaws.com)

· Ford Motor Co. v. Montana Eighth Judicial District Court | 592 U.S. ___ (2021) | Justia U.S. Supreme Court Center

· Bristol-Myers Squibb Co. v. Superior Court of California | 582 U.S. ___ (2017) | Justia U.S. Supreme Court Center

· Supreme Court Clarifies Arbitration Clauses: Key Takeaways for Companies | Womble Bond Dickinson

https://supreme.justia.com/cases-by-topic/lawsuits-legal-procedures/

[1] John Gibert Arbitration vs Litigation: A Comparative Analysis (2024), https://www.mhhplaw.com/arbitration-vs-litigation-a-comparative-analysis/ accessed on 22nd September

[2] Id, note 1

[3] Partner, Thomas J. Hall Arbitration vs Litigation of Business Disputes www.thklaw.com/wp-content/uploads/2020/04/Arbitration-vs-Litigation-Business-Disputes.pdf accessed on 22nd September

[4] Smith v. Spizzirri, 601 U.S. 472 (2024), accessed on 22nd September

[5] Coinbase, Inc. v. Suski, 144 S. Ct. 1186 (2024), accessed on 22nd September

[6] BELLO, Adesina Temitayo (PhD),Why Arbitration Triumphs Litigation(2019), accessed on 22nd September ssrn_id3354674_code2703449.pdf (elsevier-ssrn-document-store-prod.s3.amazonaws.com)

[7] Elena Kagan, Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. (2021), Lawsuits & Legal Procedures Supreme Court Cases | Justia U.S. Supreme Court Center, accessed on 22nd September

[8] Samuel A. Alito, Jr., Bristol-Myers Squibb Co. v. Superior Court of California, 582 U.S. (2017) Lawsuits & Legal Procedures Supreme Court Cases | Justia U.S. Supreme Court Center, accessed on 22nd September

[9] John Gibert Arbitration vs Litigation: A Comparative Analysis (2024), https://www.mhhplaw.com/arbitration-vs-litigation-a-comparative-analysis/ accessed on 22nd September