When two businesses disagree on a contract, the details of the agreement, or any number of other issues, they may find themselves in commercial litigation. This is the process by which businesses take legal action against one another. Commercial Arbitration is defined as a type of alternative dispute resolution (ADR) in which an arbitrator hears both parties of the argument and makes a binding decision.
Jeremy Schulman notes that businesses often choose arbitration over litigation because it is generally faster and cheaper than going to court. In some cases, it may also be less contentious than litigation, which can be important for preserving business relationships. It is important to understand, however, that arbitration is not always the best option for every business dispute. An experienced commercial litigation attorney can help you understand your options and make the best decision for your business.
What Is Commercial Litigation?
Commercial litigation is the process through which businesses take legal action against one another. Businesses may find themselves in commercial litigation for a variety of reasons, including breach of contract, breach of warranty, fraud, infringement of intellectual property rights, unfair competition, and more.
In most cases, commercial litigation begins when one party sends a demand letter to the other party (or their attorney), outlining the issues at hand and what they believe should be done to resolve them. If the parties are unable to reach an agreement after this point, they may proceed with filing a lawsuit. From there, discovery will take place before each side presents its case at trial.
What Is Arbitration?
Arbitration is defined as a type of ADR in which an arbitrator hears both the sides of the argument and makes a binding decision. The arbitrator may be a retired judge or an attorney with experience in commercial litigation. In some cases, businesses will agree to use arbitration when they first sign a contract; this is known as pre-dispute arbitration clauses or mandatory arbitration clauses.
Arbitration proceedings are usually much faster than going to court because there are no formal rules of evidence or procedure that must be followed. This also means that arbitration can be less expensive than litigation. In addition, because arbitration proceedings are typically private, they can be less contentious than courtroom litigation, which can be important for preserving business relationships.
On the other hand, arbitration proceedings are generally final and binding—meaning that you will not be able to appeal the arbitrator’s decision—and you will likely have to pay the arbitrator’s fees regardless of who wins the case.
Deciding Between Arbitration and Litigation.
So, how do you decide whether arbitration or litigation is right for your business? There are several factors you’ll need to consider, including:
- The nature of the dispute
- The amount of money at stake
- The relationship between the parties involved
- The jurisdiction in which the case will be tried
- The time frame in which you need a resolution
The concluding approach.
Commercial litigation and arbitration are both mechanisms for resolving disputes between businesses. In general, commercial arbitration is faster and cheaper than commercial litigation, but commercial litigation may be necessary if the dispute cannot be resolved through arbitration. Let’s take a closer look at each of these methods of dispute resolution.
