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Arbitration V. Litigation Pros And Cons: What Business Lawyers Need To Know.

Article Excerpt
Originally published in Texas Bar Journal, October 2006

Many business lawyers - especially those who represent international clients - harbor deep-seated concerns with the American jury system as a forum for dispute resolution. Haunted by visions of runaway juries and misunderstandings of highly publicized verdicts such as the "McDonald's Hot Coffee"1 case, they routinely insist on arbitration as the dispute resolution mechanism in contracts for their clients. This article addresses some of the pros and cons of arbitration versus litigation.

The Judicial Forum

Parties to international contracts in particular have legitimate concerns about the partiality of the local judiciary. However, before selecting arbitration as your dispute resolution mechanism, it is important to determine in what forum you are likely to land if disputes arise. As jurisdiction is determined by the circumstances of the particular case, parties will either be placed before a federal judge with a lifetime appointment, an elected state judge, or possibly an appointee of the government whose permanent tenure is subject to a referendum. Their case may be decided by the judge in a bench trial or by a jury. Juries are another indeterminate component of the litigation process. A jury is selected at random, oftentimes from a list of registered voters. It is expected that the jury pool reflects the makeup of the local population. Thus, jury members come from varying ethnicities, races, and educational and economic backgrounds. Although jurors are paid for doing their civic duty, payment is minimal. As an alternative, attorneys can consider exploring jury waiver agreements in lieu of arbitration.

Perceived Advantages Of Arbitration

Arbitration is the preferred method of alternative dispute resolution for foreign investors and international investment guarantee/insurance agencies. For international transactions, arbitration in a neutral forum provides the hope of reducing bias and avoiding parallel lawsuits in different countries. Moreover, unlike trials, arbitration proceedings are closed to the public....

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