Arbitration and litigation are both legal methods for resolving disputes, but they differ in terms of cost, time, and procedure. In this essay, we will compare the cost-effectiveness of arbitration and litigation in a 10 million shillings case in Kenya, giving examples of how these two methods differ in terms of costs and other factors.
First, let’s look at the costs of arbitration. According to the Chartered Institute of Arbitrators, the costs of arbitration in Kenya vary depending on the complexity of the case and the fees of the arbitrators. In general, the costs of arbitration are lower than those of litigation because the process is faster and less formal than a court trial. For a case with a value of 10 million shillings, the costs of arbitration can range from 1% to 5% of the value of the claim, depending on the arbitrators’ fees and other expenses.
For example, let’s say that a construction company and a real estate developer have a dispute over a 10 million shillings contract for the construction of a building. The parties agree to resolve the dispute through arbitration, and they appoint an arbitrator who charges a fee of 2% of the value of the claim. The total costs of arbitration in this case would be 200,000 shillings (2% of 10 million).
Now, let’s compare these costs to those of litigation. According to the Judiciary of Kenya, the costs of litigation in Kenya can be much higher than those of arbitration because of the formalities and delays associated with court trials. For a case with a value of 10 million shillings, the costs of litigation can range from 10% to 15% of the value of the claim, depending on the court fees and other expenses.
For example, let’s say that the same construction company and real estate developer decide to take their dispute to court instead of arbitration. The total costs of litigation in this case would be 1.5 million shillings (15% of 10 million).
As we can see from these examples, the costs of arbitration are significantly lower than those of litigation in a 10 million shillings case in Kenya. This is because arbitration is a faster and less formal process than a court trial, which reduces the expenses associated with the case.
Another advantage of arbitration is that it is a private process, which means that the parties can resolve their dispute without the need for public proceedings. This can be beneficial for companies and individuals who want to keep the details of their dispute confidential. On the other hand, litigation is a public process, which means that the proceedings are open to the public and the details of the case are available to the media and the general public.
Arbitration also tends to be faster than litigation. The average time for an arbitration case in Kenya is 6-12 months, while the average time for a court case is 2-3 years. This is because arbitration proceedings are less formal than court trials and are usually conducted by a single arbitrator or a panel of arbitrators. On the other hand, court trials are conducted by a judge and involve formal procedures such as discovery and motion practice.
Finally, arbitration can be more flexible than litigation in terms of the rules and procedures that apply to the case. The parties in an arbitration case can agree on the rules and procedures that will govern the case, which can be tailored to the specific needs of the dispute. On the other hand, court trials are governed by strict rules and procedures that apply to all cases, regardless of the specifics of the dispute.
In conclusion, arbitration is a cost-effective method for resolving disputes.
Islamic Arbitrator & Expert
Honorary Fellow IICRA -UAE