Should You Arbitrate or Litigate in a Construction Dispute?

The construction industry is using arbitration more and more in order to resolve disputes. Most members of the industry consider arbitration to have significant advantages when compared to litigation. Services like Palm Springs alternative dispute resolution services agree that there are many benefits to arbitration, but there are some negatives that should be understood as well.

Dispute Under an Arbitration Agreement

If any dispute comes up between parties over a construction contract, and the involved parties agree to arbitrate, in a process called an Arbitration Agreement, the judicial system typically compels the disputing parties to undergo arbitration.

Arbitration can be defined as an alternate method to resolve disputes. Cases that are decided by arbitration are heard by an arbitrator, or, in some cases, an entire tribunal of arbitrators. The arbitrator or arbitrators must be neutral and certified to operate as arbitrators. The arbitrator informally weighs all the evidence presented by the parties involved, after which the arbitrator decides on the case. This decision is considered to be binding.

How do you decide whether to arbitrate or litigate your case? In the construction industry, there are a few clear factors both in favor and not in favor of arbitration. This list can help you decide whether or not to arbitrate.

Factors in favor of arbitration:

1. There is lower cost involved. Most people believe that since there is no full discovery period and no court fees in arbitration, it is much less expensive than litigation. Another consideration is the faster process of arbitration, as opposed to litigation, which tends to drag on in a more costly manner. Keep in mind that this is not always the case, as arbitration can sometimes become quite expensive, especially in more convoluted cases. For this reason, some people do not consider arbitration to have a lower cost in general. For the purposes of this article, cost will remain in favor of arbitration, however.

2. It is faster than litigation. This occurs for many reasons. An arbitration hearing does not need to be scheduled into the court docket, which is typically very busy. This alone saves a great deal of time. Also, in most cases, an arbitrator has much more time on his or her hands than a judge, since he or she has to deal with much fewer cases. This makes scheduling arbitration a much faster process.

In arbitration, most of the time no appeals occur, and the rules of procedures are usually a great deal simpler. For these reasons, most people agree that arbitration is a much faster process than litigation.

3. Arbitration occurs in private, unlike litigation, which is on the public record. This becomes very important for parties who do not want all the details of their case entering the public record. Litigation does not preserve your privacy like arbitration does.

4. Typically, judges involved in litigation have no prior knowledge about the construction field. This can make it harder for them to reach a fair decision. In arbitration, the arbitrators are usually very experienced with construction and are therefore more capable of judging the case. In most cases, the level of experience and knowledge that they can bring to the case chooses the arbitrators. This can become very important, especially for the frequently complex construction industry.

5. A hearing in a litigation case is much more formal than one in arbitration. For this reason, arbitration hearings can be planned with a great deal of flexibility. There are no real limitations on where or when they are scheduled. This makes arbitration a good deal more convenient for the parties involved.

In most cases there is no way to appeal arbitration. The decision of the arbitrators is final and binding. These factors are excellent, as long as you win the case. In contrast with litigation, there will be no costly, time-consuming appeals process in arbitration. Law as court-enforceable typically recognizes the decision of the arbitrators, as well.