Arbitration or litigation – Which legal route to choose?

arbitration and litigation

South Africa is a constitutional democracy that adheres to the Rule of Law. This means that all people are subject to the same laws of justice. Disputes occur when two parties enter into a contract, moreso, commercial contracts. Arbitration and litigation are the two processes used to resolve a dispute between the parties. Here’s a breakdown of the main differences between them.

What is arbitration?

Arbitration is an out-of-court dispute resolution of a disagreement between two commercial parties. The disagreement could be a simple buying and selling matter, or collecting what is owed to another person. 

In this process the arbitrator, who is a third party, will be brought in to resolve the dispute. Both parties will agree on the rules and processes of the arbitration. This will include when and where it will be held, who the arbitrator will be, and whether an appeal process is agreed to or not. An arbitration hearing will be conducted outside the scope of the court. It is a far less formal mode of dispute resolution compared to civil litigation. 

What is litigation?

Litigation is the process of taking a legal dispute to court. Civil litigation is ordinarily between two or more parties and is conducted in a public forum. This process is formal and highly regulated and takes place at the Magistrates or High Court and the respective appeal courts of those. The Judge or Magistrate presides over the procedure, listening to each case and delivering judgement thereafter. In litigation, the entire case is of public record, even the press has access to the details.

Arbitration vs. litigation

  • The arbitration process moves quite swiftly. A dispute is filed with an arbitration body, the parties mutually decide on an arbitrator, and the process can begin. On average, it can all be completed in approximately six months. On the other hand, a civil litigation matter can take around eighteen months to two years to get to the trial court. This is why many small businesses prefer taking the arbitration route. 
  • An arbitrator can be appointed by mutual agreement between the parties. It can be someone who is skilled and experienced in the subject matter of the dispute. For example, if it is a building dispute, the arbitrator could be a building engineer or architect. However, in litigation, the Judge or Magistrate is appointed by the State and the parties have no control over this decision. 
  • Taking the arbitration route is more expensive. This is because the cost of the venue and arbitrator is covered by the parties. With litigation, the cost of the courtroom, Magistrate or Judge is covered by the taxpayers. 
  • The arbitration hearing takes place privately and confidentially. No court records are filed for the process. Whereas, with litigation, everything is out in the open with anyone having access to the court records. 

Overall, the arbitration process is faster and easier, albeit more expensive. Many small businesses opt to resolve their disputes through the arbitration route. This all depends on the circumstances and the severity of the case at hand. In arbitration or litigation, neither option is a pleasant one. To find out which route will work best for one’s circumstances, it is always advisable to speak to a professional. At MFM Attorneys, we offer assistance in legal proceedings, arbitration, litigation and much more. Get in touch with us today.