B. Comparison between arbitration and litigation

B. Comparison between arbitration and litigation

While both processes result in a binding decision, they differ in several important ways: 

(i) Voluntariness 

Litigation is a state-imposed system. Parties do not need to agree to be subject to the jurisdiction of courts. Arbitration is entirely voluntary and relies on a valid arbitration agreement. Arbitral tribunals derive their jurisdiction solely from the parties’ agreement to settle disputes privately. 

(ii) Selection of the decision-maker 

In litigation, a generalist judge is assigned by the state. In arbitration, parties can select experts with subject-matter expertise (such as engineers for construction disputes or specialists for shipping). 

(iii) Procedure 

Court procedures are often inflexible and bound by strict rules of evidence and conduct. Arbitration is more flexible and informal, allowing the tribunal to tailor the process to the specific needs of the dispute to ensure a speedier and more cost-effective outcome. 

(iv) Confidentiality and privacy 

Litigation is a public process, and judgments are generally published. Arbitration is a private and confidential process, which is often a decisive factor for businesses wishing to protect trade secrets or reputation. 

(v) Finality and appeals  

Litigation involves a multi-tiered court system with broad rights of appeal. Arbitration aims for one-stop-shop resolution with very narrow grounds for a court to set aside an award. Arbitral awards are generally not subject to appeal on the merits. 

(vi) International enforcement 

Enforcing national court judgments across borders is often much more difficult, as there is no equivalent global convention for the universal enforcement of court judgments. Arbitral awards are often easier to enforce internationally due to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a treaty ratified by over 170 countries that requires member states to recognize and enforce foreign arbitral awards with very limited grounds for refusal. 

(vii) Costs 

Judges and court facilities are public expenses, whereas parties in arbitration must pay the arbitrator’s fees and the costs of hiring a hearing venue.