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What is the difference between an arbitration and a trial?

UPDATED: June 19, 2018

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Arbitration and trial proceedings are two options that parties may choose when they cannot resolve disputes on their own. Before deciding whether arbitration or a trial is the best method to resolve your dispute, it is important to understand what they mean and the ramifications of each.

Understanding Trial Proceedings

A trial is a judicial examination and determination of issues between parties to action, whether they be issues of law or fact. The trial takes place before a court that has jurisdiction. If you have ever watched shows like Law & Order or Perry Mason, you have likely seen a trial proceeding and have a sense of how they are conducted.

The average trial is presided over by a neutral judge or magistrate with an attorney representing each party. If it is a jury trial, jury selection is done in a process called voir dire, which means “to speak the truth.” After the jury has been selected or if there is no jury, the trial will begin with opening statements by each side. Next, the prosecution (in criminal cases), or the plaintiff (in civil cases), will present its side followed by the defense. Each side can also rebut the other’s side by presenting more evidence.

After rebuttal, each side gives its closing arguments. If there is a jury, the judge instructs them on the law that they must use to decide the case. The case concludes when the jury (or judge if there is no jury) reaches a verdict. If the losing side is not satisfied with the verdict, they can appeal it in the hopes of overturning the judgment at the next trial. 

Understanding Arbitration

If you have signed an employment agreement, a credit card contract, a health insurance application, or a variety of other contracts, you have probably already agreed to arbitration without even knowing it. Arbitration clauses are found in an assortment of different agreements and often require parties to use arbitration to resolve any disputes arising out of the contract.

The following is an example of a typical arbitration clause: “Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the (insert arbitrator) in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”

Arbitration is a type of alternative dispute resolution that takes place outside of court and is less formal than a trial. Instead of trying the case in front of a judge, the parties take their dispute to a third party—an arbitrator. Parties usually submit documents or other tangible items to the arbitrator and also make oral arguments in favor of their case. Occasionally, witnesses for each party will testify about the case.

Unlike a trial, the rules of evidence are much more relaxed during arbitration. Hearsay and other evidence that may not be allowed in court can be presented during arbitration. After reviewing the presentation from both sides, the arbitrator will make a final, often binding, decision. Unlike in trials, this decision does not have to be based on the law. The arbitrator can make a decision based on what he or she thinks is just. Moreover, the decisions are usually regarded as final and can only be appealed in very limited circumstances. For example, if the decision was based on corruption, undue influence, or fraud, the decision may be appealed.   

Reasons for Choosing a Trial Over Arbitration and Vice Versa

Trial proceedings are chosen for a variety of reasons. Some parties do not want a single person deciding their case, but would like the opportunity to present their problem in front of their peers (a jury) and an impartial judge. Others want to stand up for a cause or principle (for example, tobacco or asbestos litigation) and would rather try their case in the public eye. Other people do not have a lot of money and need an attorney who is willing to work on a contingency fee basis. This means that you do not pay unless you win. Another attractive option is that should you lose, you can appeal the decision and try your case in another court. 

Arbitration is often chosen because it is less expensive than going to trial. Although some lawyers work on a contingent-fee basis, most parties must not only pay for their attorney, but also for discovery of documents and expert witness testimony. Additionally, since you will likely get an arbitration date quicker than you would a trial date, your dispute is likely to be resolved sooner. Unlike a trial, arbitration is a private procedure, so if you do not want your case in the public eye, the arbitration decision can be kept confidential. In addition, since most arbitration procedures are binding, the decision will be the end of the dispute and both parties can move forward without worrying about a later appeal.

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