The question i.e., which is better means of resolving disputes, arbitration or litigation? There is no definite answer as to which is an inherently better process.
But there are surely a number of reasons as to why arbitration could be better in resolving disputes than conventional courtroom litigation.
Benefits of arbitration over litigation
Arbitrational claims can vary greatly. A state might be brought to arbitration for compensatory claims such as expropriation, or may itself begin arbitration proceedings with other states over claims such as those related to international borders. Moreover, if one has an impression that arbitration can totally exclude courts and litigation, this impression is facing error in many areas. But parties can certainly ensure that efficient drafting of the Agreement is made—an aspect that is well within their control. It would be trite to say that arbitration is a conscious attempt of parties to avoid the delay some and hence unjust or inefficient method of obtaining resolution of the courts.
There is no one form of "arbitration" as such to compare to litigation. Additionally, it is necessary to evaluate the following factors:
( I ) the quality of decision-making,
(2) Procedural fairness,
(3) The impartiality and independence of involved decision makers,
(4) The time and cost of arbitration vis-a-vis litigation,
(5) The flexibility of each forum in respecting the special needs of parties and
(6) The quality of enforcement.
The biggest benefit of resolution of disputes through Arbitration over Court litigation is its Neutrality and Mutuality. This may be in respect of - (a) Place of hearings. (b) Language being used, (c) Procedure to be applied, (d)Nationality of Arbitration (in case of international commercial arbitration), (e) Legal representation, (f) Appointment of Arbitrators as per requirement of the nature of dispute, (g) confidentiality.
The costs incurred in Arbitration by the parties in dispute include the arbitrator's fees, rent for arbitration venues, administrative expenses and fees for the representatives of the parties and witnesses, and in most of the cases less than litigation.
Arbitration is preferred over courtroom proceedings because it is usually less expensive than litigation. It provides for speedy settlement of dispute through flexible time schedule and simpler procedures. Arbitration offers key advantages that cannot be provided during litigation. In many cases there is an advantage that the Arbitrator or arbitral tribunal is an expert in the field of the dispute so that the entire process can be conducted without the interference of lawyers, or other representatives, with major gains in speed and economy. Thus, many disputes as to quality in the commodity trades, many disputes as to the rent of commercial property, and many small consumer disputes, are resolved in this way.
Arbitration is the need of present era keeping in mind the delays in litigation, the acquittal rate , the expenses and the number of legal formalities involved.