When you have a choice of forums in which to litigate a dispute you can't otherwise resolve, which is cheaper, litigation or arbitration? Which is quicker? Which is more efficient? The only completely accurate answer to all three of these questions is the lawyer's favorite answer: it depends.
Generally, litigation in any court is going to be more expensive than litigation in any arbitral forum. This is because, unlike courts, which allow liberal pre-trial discovery, most arbitrators are disinclined to allow discovery beyond exchange of documents and perhaps some responses to written questions. Depositions, usually the most expensive form of discovery, are discouraged in arbitration. However, depending upon which arbitral forum you choose and who the arbitrators are, you may find that much of the discovery and motion practice that inhere in court cases will also be present, albeit to a lesser degree, in the arbitral forum.
When the question changes to speed and efficiency, however, the answer is less clear. Again, usually an arbitration forum will get you to the resolution stage more promptly than most courts. Read on to learn more about the respective strengths and weaknesses of arbitration and litigation.
Expense
As anyone with experience with the court system knows, litigation has become very expensive. The propounding of and responding to interrogatories and document requests and the taking of depositions can quickly build up thousands, tens of thousands and even hundreds of thousands of dollars in expenses. This is particularly so where the discovery requests are contested, as they frequently are. In addition to discovery, various motions are likely to be filed by one or both sides, requiring legal research, brief writing and often oral argument. The rules in most courts allow liberal discovery with very little constraint upon how broad the discovery can be, how many interrogatories can be asked, how many depositions can be taken, etc.
On the other hand, in most arbitral forums only document production is explicitly provided for. Beyond that, there is virtually no authorization of depositions and perhaps a vague authorization of the exchange of written information similar to interrogatories. With discovery in arbitration forums being so limited, the savings on pre-hearing proceedings are usually very substantial. However, if you have a liberal panel (the presence of lawyers on the panel may make it more likely that more expanded discovery will be allowed), you could find yourself incurring much of the discovery expense of a court proceeding.
One thing that must be considered in deciding which forum to elect is whether extensive discovery of the other side, particularly including depositions, is important to winning your case. If so, then it may be prudent to opt for incurring the expense of litigation in order to increase your chances of winning.
Speed To Trial
The issue of whether the arbitration forum is going to get the problem resolved sooner is more problematic than the cost issue. There is a wide disparity between time from complaint to trial among the various courts and even on the same court where the practices of the judges of that court vary from one to the other. Since one does not know who the judge or the arbitrators will be when making the election, it is usually impossible to know whether any given arbitration proceeding is going to reach a hearing faster than a court proceeding on that dispute. Only where the court choice is limited to a county with a large backlog, where it is known that every case will take several years to reach trial, can one be reasonably sure an arbitration will bring about the quicker resolution.
Most Efficient Resolution
With respect to efficiency, which combines the issues of cost and the amount of time and effort involved in achieving resolution, it is more likely in most instances that arbitration will be more efficient. As indicated above, it tends to hold down the amount of time and effort expended on various forms of discovery and motion practice. On the other hand, judges sometimes exercise tight control over the timing and amount of proceedings before them. Where one is confronted with a very litigious opponent, it may be more beneficial to have a judge who will put firm limits on that party than arbitrators who may allow the party to get away with more obstreperous activities.
Other Considerations
Your expected witnesses may dictate the choice of a court forum. Courts have the power of subpoena as well as the power to enforce their subpoenas if they are not obeyed (usually by issuing a bench warrant for the arrest of the subpoenaed person). Arbitrators generally have the power to issue subpoenas but probably do not have much authority to back up the subpoenas if they are not obeyed. Thus, if you need crucial witnesses outside of your control in order to present your side of the story, you may wish to choose a court forum where you can compel their attendance (provided that they are located within the territory where the court's subpoenas may issue).
Another consideration is that in a court forum most issues can be determined by a jury at the request of either party. One must consider, in choosing a forum, whether it would be beneficial for the case to be decided by a jury. If your case is one where you feel strongly that a jury would not be beneficial to your case, you definitely want to stick to the arbitration forum where a jury is out of the question.
At one time arbitrators were without power to award punitive damages, but no longer. In most arbitral forums today the arbitrators can award punitives.