Litigation vs Arbitration: Is there a difference and which route should you choose?

Arbitration is a dispute resolution mechanism which must be agreed to by parties. It involves the appointment of an arbitrator to preside over and to make a final decision on a dispute between two or more parties. Additionally, an arbitration award will be made at the end of the arbitration process.

In order for an arbitration to proceed, an arbitration agreement is required. The Arbitration Act 42 of 1965 defines an arbitration agreement as ‘a written agreement providing for the reference to arbitration of any existing dispute or any future dispute relating to a matter specified in the agreement…’.

The initial reaction of parties to a legal dispute may be to immediately pursue litigation, however the contracts governing the dispute may not provide for the opportunity to do so. Parties may have to resolve the dispute through the means of arbitration.

A common clause in modern contracts is the dispute resolution clause, which provides that any disputes arising from the contract must be handled through the process of arbitration. Courts generally enforce arbitration clauses in contracts when the clause has been voluntarily agreed to, as such only exceptional circumstances would disregard a valid dispute resolution clause that has been agreed to.

For those that have the luxury to choose between the two processes, it is important to understand the key differences between litigation and arbitration.

1. Costs
   • In litigation one is required to pay your own legal representatives (naturally subject to the outcome of the costs order at the end of the matter).
   • In an arbitration, one needs to be mindful that the arbitrator, venue fees and transcription fees must be paid in addition to your own legal representatives. It is generally equally shared between the parties and paid in advance to the arbitration commencing 

2. Time:
   • Arbitration is typically faster paced than litigation. With regards to arbitration, the parties will generally wait a few months from when the dispute is referred to when the main hearing will take place. Because there is typically less formalized procedure throughout an arbitration, there is less opportunity for the process to be delayed.

South Africa unfortunately does not have the resources to ensure a speedy litigation process, with issues such as jam-packed court rolls and inadequate forums aiding these difficulties.

3. Privacy
   • Arbitration proceedings are typically dealt with on a private basis and are not disclosed to the general public. In contrast, the public can usually attend court proceedings and judgments can generally be accessed by the public. Subject to their discretion, a judicial officer may allow for the non-publication of the identities of parties and other persons involved in litigation. 

4. Finality and appeals
   • Arbitration proceedings are generally not subject to appeal.
   • Litigation caters for an appeal process, and judgments in the lower courts may be overturned on appeal.

As briefly discussed above, there are several key differences between litigation and arbitration. Parties who are referring a dispute need to balance the pros and cons of these differences to decide which path to take – as such it is advisable to consult with a legal practioner to determine which is the appropriate dispute resolution method.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.