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Arbitration vs. litigation for resolving business disputes

The details of every business dispute are unique. Each case will require its own unique method of resolution. There are several ways to go handle business disputes. Two of the most common are arbitration and litigation.

Arbitration and litigation are very different from one another. Whether you decide to arbitrate or litigate a business dispute will depend on individual circumstances.

Litigation

Litigation is a process by which a business dispute is resolved in civil court by a judge or a jury. When two parties are in conflict, they appear before a court. Each side presents their arguments, and the judge or jury issues the final decision. It is a long process that can quickly become expensive.

One of the downsides of litigation is that it is a matter of public record. Many businesses prefer to keep their disputes as private as possible to avoid negative publicity. Litigation also takes a lot of power out of each party’s hands, since the final say is not up to them. Because of this, many parties prefer to resolve business conflicts through arbitration.

Arbitration

When parties arbitrate a dispute, it means that they resolve it through private negotiations rather than in a public court. Usually, both companies work with a disinterested arbitrator to find a resolution. In complicated cases, there may be more than one arbitrator. Sometimes an arbitrator will hear both sides’ arguments and make a non-binding decision on their behalf. Though arbitration is usually faster than litigation, it can still run a hefty price tag.

It is becoming common for businesses to include mandatory arbitration clauses in their contracts. These clauses require that any dispute between the signatories be resolved through arbitration rather than litigation. This is one step that companies have taken to avoid going to trial.

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