Arbitration is usually assumed to be more cost effective than Litigation because it is a less adversarial, private means of resolving disputes. One advantage of Arbitration is that parties may and can still maintain good commercial relationships after the proceedings which in turn prevents costs that may be incurred from severing such relationships or building new ones.

Another advantage arbitration has over litigation is time which can influence costs. The average legal proceedings may span over a couple of months/year. This prolonged timeline may inadvertently lead parties to incur substantial costs in filings processes, additional legal practitioners’ fees and associated expenses that may have been avoided by Arbitration. However, Arbitration is not always cheaper than litigation. The complexity of a matter before an Arbitral Tribunal might necessitate a demand for higher Arbitration fees and expenses. In a situation where the Arbitration fees are fixed at a percentile of the claim, the cost of the Arbitration may be excessive in comparison to the cost of Litigation before a Court of Law for the same matter. Arbitration fees may also vary depending on the level of expertise required for the matter, the number and/or qualifications of the Arbitrators, etc.

It is noteworthy that the time frame for resolving a dispute by Arbitration may be elongated where a party intentionally stalls the Arbitration process. As a result of this, the costs of the Arbitration may increase to take into account the additional time and resources used by the Arbitrators.

In summary, Arbitration may not always be more cost effective than Litigation. A Party must always consider the circumstances surrounding his Claim. In addition, it may be wise to seek the guidance of a legal practitioner in determining what dispute resolution method may be cost effective for your matter. This is because, contrary to popular opinion, it may be more suitable and beneficial to the parties to institute a suit in Court.