Arbitration or court: how do they differ?

Two ways to get a binding decision

Litigation means having a dispute decided by the courts, following the Rules of Court 2021. Depending on the size of the claim, the case is heard in the State Courts or the High Court, and a judge decides it.

Arbitration is a private process in which the parties appoint one or more arbitrators to decide the dispute. The decision is called an award, and it is binding. In Singapore, domestic arbitrations fall under the Arbitration Act and international ones under the International Arbitration Act.

You usually need an agreement to arbitrate

Arbitration depends on consent. Most often, the parties agreed to it in an arbitration clause when they signed their contract. Without such an agreement, a dispute will usually go to court. So the first step is often simply to read the dispute resolution clause in your contract.

The main differences

In broad terms:

• Privacy: arbitration takes place in private and awards are not usually published. Court hearings are generally open and judgments are often published.
• Choice of decision-maker: in arbitration the parties can choose arbitrators with expertise in the subject, such as construction or shipping. In court, the judge is assigned.
• Procedure: arbitration lets the parties shape the rules and timetable. Court procedure follows the Rules of Court.
• Appeals: court decisions can be appealed to a higher court. Arbitral awards have very limited or no rights of appeal.
• Enforcement abroad: arbitral awards can be enforced in more than 160 countries under the New York Convention.

Challenging the decision

A party who loses at trial may appeal to a higher court, for example on the basis of an error of law or a wrong finding of fact. This gives a second look at the case, but also adds time and cost.

An arbitral award is meant to be final. Under the International Arbitration Act, it can only be challenged on narrow grounds, such as the tribunal acting outside its jurisdiction, a breach of natural justice, or the award conflicting with public policy. A party who believes the arbitrator simply got the facts or law wrong will usually have no remedy.

Cost and speed

Arbitration is often described as quicker, because the process is more streamlined and there is little room for appeals. It is not necessarily cheaper. The parties pay the arbitrators' fees and institutional and administrative costs, which they do not pay in court.

Litigation follows a structured, multi-stage process and appeals can extend it. On the other hand, the court can make orders that compel an uncooperative party to act, and the public nature of court proceedings can be useful where a party wants a clear ruling on a point of law.

Which might suit your dispute

Arbitration is often preferred where confidentiality matters, where an award may need to be enforced in another country, or where specialist knowledge would help, as in many construction and international trade disputes. Litigation may suit a party who wants the option of an appeal, values a public ruling, or needs to enforce within Singapore.

If your contract already contains an arbitration clause, that will usually decide the question. If you are negotiating a contract now, it is worth thinking about which process you would want if a dispute arose.

Getting advice

A lawyer can review your contract's dispute resolution clause, explain how each route would apply to your dispute, and help you weigh up cost, time, privacy and enforcement.