February 27, 2013

Arbitration vs. Litigation – 5 Issues to Consider

From the Ground Up: A Construction Law Bulletin

Our topic for the month…

Deciding whether to utilize a mandatory arbitration clause in a contract is important, especially in the construction industry. Advantages and disadvantages of litigation versus arbitration should be carefully weighed before entering into a contract or subcontract. Factors to consider:

  • Time. Arbitration frequently results in a quicker decision than taking the matter to trial, largely due to the absence of extensive pretrial discovery.
  • Cost. Arbitration tends to be less costly than litigation, most often because of the limited discovery process.
  • Confidentiality. Barring the entry of a protective order, litigation is a matter of public record. Arbitration is a private proceeding, and thus more likely to ensure confidentiality.
  • The Decision Maker. An experienced arbiter or panel with expertise in the subject area can greatly streamline the process and bring credibility to the decision.
  • Appeal. Litigants can appeal disputed results, while an arbitrator's decision is generally not subject to appeal. If finality is a priority, arbitration is likely the better option. Litigation is preferable if you want to maintain the option to correct decision mistakes through appeal.

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