As a business leader, one of your earliest and hardest-learned lessons will near-invariably be that challenges can come from any direction. Many entrepreneurs and first-time business owners find this challenge comes in the direct form of financial difficulty – but, ultimately, any and every challenge has the potential to harm your bottom line.
There’s one key type of challenge, though, that can cause the most issues for a business on the rise: people. Disputes are a natural part of society, and much is the same for business. Whether you’re an irate client or an exiting partner, dispute resolution is a vital concern. There are two formal directions you can travel to address a dispute, in the form of arbitration and litigation. What are these routes, and what do you need to know about their similarities and differences?
1. Key Differences In Approach And Process
First, let’s define each term for ease of understanding. Arbitration is a private process of alternative dispute resolution, conducted by a relevant independent body and involving a team of appointed arbitrators. Litigation, meanwhile, is simply the process of taking a dispute to court for a formal, public judgement one way or the other.
The key difference, then, is confidentiality. Arbitrations can happen behind closed doors, protecting named parties and sensitive information from public eyes and the potentially negative PR consequences of the dispute in question. But this isn’t the only difference.
2. Time, Cost And Enforceability Considerations
Arbitration is also a quicker route to solving disputes, owing to the relative speed with which arbitrators can move to secure evidence and make a judgement. Moreover, international arbitration makes satisfactory resolution more likely, where international court cases are often logistically sticky – and their judgements difficult to enforce.
Arbitration is also, generally, cheaper than the cost of a court case. Legal fees, court costs and the risk of financial losses through the judgement make court a difficult sell for businesses wanting to protect the nature of an agreement from the offset, where arbitration can be written in as a stipulation of a contract to the financial favour of both parties.
3. How To Choose The Right Route
From the outset, arbitration sounds to the best option for dispute resolution; after all, it’s quicker, cheaper, confidential and generally more enforceable – arbitration judgements carrying, as they do, legal weight with courts. But this doesn’t mean that arbitration is the best route for every conflict.
While publicity may be a demerit for some businesses, it can be a merit to others. The transparency of the case can help, depending on the dispute. Discovery is also more robust in civil cases, a boon for dealing with dishonest second parties. Finally, the outcome of court cases serve as referential material for future cases, meaning the courtroom judgement of a dispute could assist other businesses facing similar disputes.