Arbitration is often thought to be preferable to litigating in court, and in some circumstances, it may be. Deciding to arbitrate, however, should be the result of a careful analysis of arbitration’s benefits and disadvantages. That analysis requires examining some common perceptions about arbitration. Below, we explore five of the most common assumptions about arbitration and suggest some practical considerations. 

1) The Money 

Assumption: Parties often assume arbitration will be cheaper than litigating in court. There is a perception that arbitration will not require the exhaustive and expensive discovery that is now routine in commercial litigation in courts. Parties expect that arbitration will entail less written discovery, fewer depositions and a more practical approach to document production. Parties also assume that there will be limited availability of dispositive motions in arbitration. And, as a result of the cost associated with the arbitrator’s review and resolution of motions, parties assume that there will be less of the motions practice often conducted in court. 

Reality: Regardless of the forum, however, the key features of a commercial case presentation are the same. Whether plaintiff or defendant, a party must at minimum: (i) marshal the relevant facts; (ii) determine and understand the applicable law; (iii) select and prepare witnesses; (iv) prepare exhibits; (v) complete offensive and defensive discovery; and (vi) conduct the trial proceedings before the fact finder. The cost of that work is unaffected by the choice of tribunal. 

Moreover, if the dispute is purely a question of law rather than fact, the availability of summary disposition in court may be beneficial, as well as cost-saving. On the other hand, if the dispute will turn on complex factual issues, the evidence of which may lay in the possession of the opposing party, the availability of various discovery mechanisms may be advantageous. In addition to the legal fees, the parties must pay the expenses of the arbitration and its logistics.  Literally, everything is for sale. So, one must compensate the members of the arbitration panel (including any associated expenses), pay the ASP’s fees, hire the court reporter, arrange rooms, chairs, desks, etc., and provide for the A/V equipment. 

2) The Speed 

Assumption: Arbitration is perceived to be faster. Civil dockets in many jurisdictions are severely backlogged. In some state jurisdictions, a matter may linger on for years before being tried on the merits. This is especially true in jurisdictions where judges are not routinely assigned to “live with” a case from cradle to grave. In a private arbitration, however, the parties’ dispute is the sole focus of the arbitration. The parties and the panel are very motivated to set a hearing date quickly to resolve the dispute.