Ans.
Litigation :
Litigation is a method by which the parties resort to a court established by
law. The litigation is initiated and completed according to the rules of the
court which exist to ensure the proper conduct of the litigation. The court
adjudicates only on the basis of issues which the parties present to it and
upon the evidence which the parties choose to adduce. Litigation however, is
costly, time consuming and most inconvenient. It creates bitterness and
adversely affects the long term commercial interests of the parties.
Arbitration : Arbitration
is a written agreement to submit present or future disputes or differences to
arbitration whether arbitrator is appointed or not. Arbitration is the
voluntary submission of disputes not to a court but to a sole arbitrator or an
arbitral tribunal chosen by the parties or designated by a third party who is
nominated by the contracting parties to make such appointment. Arbitration is a
quasi judicial proceeding and an out of court settlement of the commercial
disputes. It has gained greater popularity because of certain advantages over
court litigation.
Arbitration
vs. Litigation
It will be worthwhile to mention here that arbitration and
litigation are two traditional and well recognized methods, for settlement of
commercial disputes. The fact that parties resort to arbitration or litigation
does not necessarily mean that their commercial relationship has been adversely
affected or they are hostile to each other. The business men world over,
despite disputes, continue to trade with each other and live with each other to
their mutual advantage.
In view of the growing complexities of international business, the
businessmen intend and try their best to avoid disputes. But whenever some
disputes or differences arise, the issues are left to be decided by a judge or
an arbitrator mainly because they are preoccupied, unable to agree and are
content to have their differences/disputes settled by an outsider. They desire
to abide by the decision of the court or arbitrator without affecting their
good commercial relationship. Many commercial disputes are settled not by
litigation but by arbitration. It is said that the lawyers prefer litigation
while the business men prefer arbitration and their preferences for arbitration
predominates in international contracts.
Limitations of Court Litigation
The limitations of court litigation are as follows.
i) Court proceedings are slow and time consuming besides being
very formal.
ii) The judge, expert or eminent in the field of law may not be
expected to have the same expertise in the lines of international trade and
business.
iii) The time and dates of hearing in a court of law may not be
convenient to the parties.
iv) Court proceedings and judgments being open to public no
business secrecy can be maintained.
v) Litigation may result in bitterness and breach of commercial
relationship between the pal-ties.
vi) Litigation is costly and additionally more difficult in a
foreign court.
vii) International trade laws and procedures are rather
complicated and the party litigating has to get acquainted with these laws.
Advantages of Arbitration
In view of the limitations of court litigation, the arbitration is
preferred by businessmen mostly for its advantages which can be stated as
follows:
i) Arbitration proceedings can be commenced and completed within a
specified time limit depending on the nature of the dispute. Arbitration is
therefore, quicker than litigation.
ii) The costs and expenses of arbitration are less compared to
court litigation.
iii) Arbitration promotes goodwill and better trade relations
between the parties.
iv) In arbitration, the parties can avail of the services of
experts who are experienced and more knowledgeable which is not possible in a
court litigation.
v) Arbitration ensures privacy and secrecy as the proceedings are
private and the award given by the arbitrators is also not published.
vi) The arbitration proceedings are less formal and more flexible
than litigation.
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