What is the difference between litigation and arbitration; two processes of dispute
resolution in South Africa? In this article, I review the basic elements of each as well
as the benefits and pitfalls one experiences when going through either. This article
aims to clarify why you might prefer to use the one means over the other to resolve
a civil dispute.
Litigation is a very old process of dispute resolution which takes place in our courts
– whether it be the Magistrates’ or High Court and the respective appeal courts of
those. A Magistrate or Judge presides over the process, hearing each case put
forward and delivering a judgment thereafter. Civil litigation is between two parties
and criminal litigation is between one (or more parties) and the State. Civil
litigation cases are conducted in a very public forum and the process is formal and
highly regulated. The entire matter is of public record with anyone, including the
press, having access to the records that are filed as part of each party’s case.
Arbitration, on the other hand, is a far less formal mode of dispute resolution that
does not take place in a courtroom but a venue that the parties choose. An
arbitration hearing is conducted completely outside the ambit of the courts. Parties
in a dispute with one another would proceed to have the matter adjudicated via
arbitration in terms of a pre-agreement with one another when they contracted
initially (before the dispute arose) or at the time of the dispute, rather than electing
to go through the civil litigation process. The parties will agree on the rules and
processes of the arbitration, for example, when and where it will be held, who the
arbitrator will be and whether an appeal process is agreed to.
An essential difference between litigation and arbitration is that an arbitrator can
be appointed by mutual agreement and be one who is skilled and experienced in
the subject matter of the dispute, for example, in a building dispute, the arbitrator
might well be an architect or building engineer. This is not the case with civil
litigation, where the Magistrate or Judge is appointed by the State and the parties
have little or no control over their appointment.
It is also far quicker to get an arbitration hearing than a court date. As soon as all
the parties are ready with their documentation and the availability of their expert
witnesses has been secured, the arbitration hearing can be set down – on average it
can be a matter of months, with the process being completed within approximately
six months. Alternatively, it can take 18 months to two years to get to the trial court
in a civil litigation matter. In litigation and arbitration, the timings would obviously
depend on the nature and complexity of the matter.
Disputes that are arbitrated are completely private and confidential – both the
hearing and all the documentation involved. One can also add a “confidentiality
clause” into the arbitration agreement forcing both parties to maintain
confidentiality around the entire process.
In litigation, the judgment of the court can be taken on appeal. With the Western
Cape High Court for instance, to a full bench of judges, then to the Supreme Court
of Appeal and, if still unsuccessful, to the Constitutional Court in certain
circumstances. An appeal can add on an additional two years to the final
determination and outcome of the dispute. Arbitration awards, on the other hand,
possess a quality of finality. In general, arbitration awards are final. If the parties
agree to an appeal procedure, the arbitration award may be appealed to a bench of
three arbitrators. Even if the matter is appealed, the appeal can be heard as soon as
a date can be set by the arbitrators and the parties to the dispute. Therefore, even
the appeal in arbitration can be dealt with far more expeditiously than that of a
formal litigation process.
Arbitration is, however, a more expensive route to follow than the litigation
process. With arbitration, the cost of the venue and arbitrator is covered by the
parties themselves, whereas with litigation, the cost of the courtroom, the
Magistrate or Judge and other court officials is covered by the taxpayer. Having
said that, time is money, and the lengthy appeal processes involved could mean a
turnaround time of approximately four years from inception to final determination
of the dispute.
In both litigation and arbitration, having attorneys represent each party is the
norm, and each party calling expert witnesses, a standard – unless the matter is
purely a factual inquiry. With arbitration however, the parties are more in control of
the timing of the proceedings and can therefor better manage the time of their
expert witnesses.
All in all, litigation and arbitration each have a firm place and function in our legal
system. The arbitration process has certain advantages over litigation, however,
the cost can be a deterrent.
