COMPARISON OF ARBITRATION WITH LITIGATION


First Published: March 12, 2018

COMPARISON OF ARBITRATION WITH LITIGATION

Peter Ramsden lists the following as the commonly recognised differences between arbitration and litigation.[1]

a)  Arbitration is dependent on the existence of a prior arbitration agreement, while a claimant can          institute judicial proceedings against the other party without the other party’s co-operation;

b) Arbitration is a private process and only those involved in the arbitration process have access to the hearing, while litigation is a public process and the general public, including the media, have free access. Companies and other litigants often prefer the privacy of arbitration and the protection that privacy and confidentiality provide for reputation and trade secrets;

c) In arbitration, the parties themselves select the arbitrator through agreement either directly or indirectly. The parties can also agree on the qualifications or expertise of the arbitrator. In judicial proceedings, the parties have no say on which judge is allocated to hear the case;

d) In arbitration, the parties choose the venue of arbitration, normally by nominating a neutral city in the arbitration agreement. Judicial proceedings take place in a court that has jurisdiction which may give one of the parties a forum advantage;

e) The arbitral award is generally final and binding and not subject to review or appeal. In judicial proceedings judgments are reviewable and appealable;

f) Judicial proceedings are a formal legal process, where procedural errors can prove fatal to either party’s case. With a number of caveats, this is less so in arbitration;

g) Arbitration is said to be less expensive than judicial proceedings, although in court litigation the pay the arbitrator’s fees, for the venue, and for the recording and transcription of the proceedings;

h) An important advantage of arbitration for the claimant is that there is minimum delay. The process can be very efficient. Courts are often booked years in advance and judicial proceedings are subject to other purposeful delays brought about by litigation tactics. This expedited process may course prove to be a disadvantage for the defendant.

The following are the other differences between arbitration and litigation:

 a) An arbitrator can be someone with no legal experience. In litigation, this is not possible. The              Judicial Officer in litigation is either a magistrate or a judge; someone with legal experience.

b) In arbitration, the parties determine the arbitral process. In litigation, the process is determined        by the rules of court.

c) In litigation only one party can insist that the dispute be decided in court. If the dispute is to be           decided by way of arbitration, then all the disputants must agree to the process.

d) In litigation, pleadings should not contain evidence. In arbitration, pleadings may contain.

e) In litigation, a Respondent’s failure to timeously file his opposition may result in him being barred and a default judgment being entered against him. In arbitration the Respondent’s failure to timeously file his statement of defence does not entitle the claimant to a default judgment. The arbitrator must determine the matter on its merits.

f) An arbitral award unlike a court order which is executable upon issuance, is only enforceable upon registration as a court order in terms of Article 35 (1) of the Arbitration Act.

g) A court is permanent whilst an Arbitral tribunal must be brought into existence each time there   is  an arbitrable dispute for resolution.

h) In litigation a Court can grant absolution from the instance whilst in arbitration there is no room  for such an order.

i) The judgments of national Courts can only be enforced in countries where there are reciprocal enforcement arrangements in place. In Zimbabwe such countries are referred to as “designated countries”. It is not every foreign judgment which can be recognised and enforced in Zimbabwe. Section 2 of the Civil matters (natural assistance) Act (Chapter 8:02) defines judgment “as meaning a judgment or order given or made by a Court or tribunal requiring the payment of  money, and includes an award of compensation or damages to an aggrieved party in criminal proceedings” In terms of SI 65/98, 360/98, 9/99 and 129/2003 the designated countries are as follows:

  • Australia
  • Germany
  • Dominica
  • Ghana
  • Portugal
  • South Africa
  • Italy
  • Zambia
  • Slovak Republic
  • Bulgaria

Whereas arbitral Awards are enforceable in any of the 157 countries which have signed the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958-commonly called the New York convention.

j)  In litigation a Court’s decision is binding on inferior courts. In arbitration, the arbitral tribunal’s decision is binding on no one but the parties to the award.

k) In Tch Air conditioner (Zhongshan) co Ltd v The Judges of the Federal Court of Australia[2] the learned judges highlighted the significant difference between judicial power and arbitral power. They said;

“Judicial power is conferred and exercised by law and coercively. It is not invoked by mutual agreement but exists to be resorted to by any party considering himself aggrieved. Its decision is made against the will of at least one side. Whereas in the case of private arbitration, the arbitrators’ powers depend on the agreement of the parties”

l)  A judge’s power is derived from the state whilst an arbitrator derives his power from the agreement of  the parties.

m) An arbitrator is paid by the parties whilst a judge is paid by the state.

n)  An arbitrator is accountable to the parties whilst a judge is accountable to the state.

 

Business people are encouraged to use arbitration as opposed to litigation for the resolution of their commercial disputes.

 


Davison Kanokanga

BL, LLB, AA ARB, CIArb

[1] Peter Ramsdem -The law of Arbitration pages 6-7
[2] [2013] HCA 5 (13 March 2013)

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