Arbitration vs. Court: The Best Choice for Low-Value Disputes

When faced with a low-value commercial dispute, such as those under $250,000, choosing the right resolution method is crucial. The traditional court system, while thorough, can be both time-consuming and costly. Arbitration, particularly under the Arbitration Victoria Rules, often provides a more efficient and cost-effective alternative. Let's explore why arbitration might be the better option for resolving these disputes.

The Time Factor: Efficient Dispute Resolution

Consider the typical timeline of a court case. Filing a claim in the County Court can lead to a trial date more than a year away, causing prolonged business disruptions and ongoing stress. In contrast, arbitration aims to resolve disputes much faster.

In 2023, a $143,000 dispute commenced in the County Court was resolved instead through arbitration in just six months, even with a three-month delay requested by the parties. Had this case proceeded in the County Court, it would have taken at least 13 months to reach trial. The expedited nature of arbitration means disputes are settled more quickly, allowing businesses to return to normal operations sooner.

Cost Comparison: Significant Savings

The financial aspect of dispute resolution cannot be overlooked. Here’s a comparison of estimated costs in the 2023 dispute, which was commenced in the County Court but determined, by consent, by arbitration:

Court Costs:

•    Filing and trial fees in the County Court: approximately $6,888.
•    Legal costs for a 3-day trial: around $34,000 per party.
•    Preparation of witness outlines: about $8,333.

Arbitration Costs:

•    Arbitrator’s fees (capped at 10% of the disputed amount): roughly $14,300.
•    Legal costs for a one-day hearing: about $14,000 per party.
•    Preparation of witness statements: approximately $12,500.

Total Costs:

•    Litigation: $83,220.90
•    Arbitration: $54,800

In this real-life example, arbitration was significantly cheaper than litigation, primarily due to the shorter duration of the process. Reducing the time spent on legal proceedings directly translates to lower costs, offering substantial savings.

Business Continuity: Minimal Disruption

Lengthy legal battles can disrupt business operations, affecting productivity and focus. Arbitration's quicker resolution process, under the Arbitration Victoria Rules, means less disruption to your business activities. This allows management and employees to concentrate on core business functions without the ongoing distraction of a prolonged dispute.

The Finality of Arbitration: Certainty and Closure

A key advantage of arbitration is the finality of an arbitral award. Arbitration awards are typically final and binding, providing parties with certainty and closure. Unlike court rulings, which can be subject to multiple appeals, arbitration offers a definitive end to the dispute, enabling businesses to move forward with confidence.  In addition, arbitration awards are easily enforceable in court.

Conclusion

While the County Court of Victoria is well-regarded for handling commercial disputes, litigants often face delays due to the Court having a heavy caseload. Arbitration, particularly under the Arbitration Victoria Rules, offers a faster and more cost-effective alternative for low-value disputes. The streamlined process not only saves time and money but also minimizes business disruption and provides a sense of certainty and closure.

For low-value commercial disputes, arbitration is a compelling option. It’s a smart choice that offers efficiency, cost savings, and finality.

Authors: Robert Heath KC and Adam Rollnik

To explore how arbitration can benefit your business, visit Arbitration Victoria and discover more about the arbitration process and its advantages.