Can Arbitration “Prevent” Litigation?

By R. David Gallo

Today, many lawyers and parties think of commercial arbitration as a way to “litigate” a matter cheaper, faster, and more privately than in court.  Indeed, while there are real differences between arbitrations and courts, modern commercial arbitration shares many important features with court litigation.  For example, the parties typically rely heavily on the law in presenting their respective cases to the arbitrators.  Also, particularly in the United States, arbitration will have discovery.  The discovery may be less expansive and expensive than in court, but it will often still require a significant investment of time and money.  And while there will hopefully be some added measure of civility among counsel and parties in arbitration, this does not always happen.  Arbitration can be just as adversarial and acrimonious as court litigation.

In these observations, some will see the natural evolution of dispute resolution that tracks the growing complexity of business relations.  Others may see an unfortunate departure from the promise that commercial arbitration once held.  Julius Cohen might have fallen into the second category.  Cohen was a lawyer and a major proponent of arbitration.  He was one of the primary drafters and lobbyists responsible for the 1920 New York Arbitration Law and the 1925 Federal Arbitration Act.  These laws represented a seismic shift in the law of arbitration in the United States, most notably by making agreements to arbitrate enforceable.

In 1921, Cohen wrote an article reflecting on the new New York Arbitration Law and advocating for the federal legislation that would soon come.*  Cohen noted that the original committee that lobbied to update U.S. arbitration laws was called the “Committee on the Prevention of Unnecessary Litigation.”  The committee believed that “in the interest of preventing unnecessary litigation” we must encourage “the settlement of disputes out of court by arbitration.”  Cohen explained that arbitration among commercial parties allows for “trade questions” to be decided by trade “experts” on the basis of “trade customs and trade facts.”  In arbitration, issues of damages could be “disposed of on the basis of trade experience,” rather than on the basis of rigid legal doctrines.  Whereas litigation often resulted in “the breaking up of friendly relations,” arbitration was better suited to the “continuity of friendly relations” because it permits parties to “settle their differences without friction.”

To be sure, what Cohen described in 1921 may exist today in some arbitrations administered by certain industry or religious organizations.  But Cohen was not talking exclusively about such specialized kinds of dispute resolution.  Cohen was talking about commercial arbitration and he was building the case for the Federal Arbitration Act that today governs a significant portion of arbitrations taking place in the United States.

Is there anything today’s lawyers and parties can take from Cohen’s 100-year-old remarks?  Would it be helpful if more stakeholders saw arbitration as a way to “prevent” litigation, instead of seeing arbitration as litigation in a conference room with a little less discovery?  Or are Cohen’s words out of place in the modern business world?  Certainly, much has changed in law and business since 1921.  Cohen likely did not foresee that his efforts to improve dispute resolution among merchants would lead to the spread of arbitration into many additional types of commercial disputes.  If he had, he may not have held such a rose-tinted view of arbitration’s promise.  In the end, perhaps it is simply a positive development that we now also bring our more complex and impersonal business disputes to arbitration, even if that means that those arbitrations may look more like litigation.  If even a small measure of Cohen’s ideals can be realized, this is a win.

About the author: 

David Gallo specializes in business litigation and arbitration.  Prior to moving to Atlanta, David studied under leading arbitration practitioners and scholars at Columbia Law School, practiced litigation and arbitration at two AmLaw 100 firms in New York, and taught arbitration at Fordham Law School.


About the Arbitration Blog

This blog is a user-friendly resource for businesses and individuals who find themselves faced with issues involving arbitration.  Perhaps you want to include an arbitration clause in your contract, or you are being asked to sign a contract with an arbitration clause.  Maybe a dispute has arisen and you want to begin arbitration proceedings but you are not sure whether your arbitration clause covers the dispute (hint: it usually does).  Perhaps you received a subpoena for documents in connection with an arbitration in which you are not otherwise involved.  This blog provides you with answers to simple questions and will help you ask the right questions when confronted with more complex issues.

Among other topics, we cover how to draft an arbitration clause and what to expect in arbitration proceedings.  We discuss the differences and similarities among arbitrations governed by Georgia law, federal law, and international law.  We explore—in layman’s terms, whenever possible—the Georgia Arbitration Code, the Federal Arbitration Act, transnational law, and decisions from Georgia’s state courts, Georgia’s federal district courts, the U.S. Court of Appeals for the Eleventh Circuit, the U.S. Supreme Court, and foreign tribunals.  We provide toolkits and checklists you can use to navigate everyday arbitration issues.  We discuss the various contexts and industries in which we have handled arbitration issues for our clients, including:

  • Breach of Contract
  • Closely Held Company Shareholder Disputes
  • Communications
  • Construction
  • Earn Out Disputes
  • Employment
  • Executive Separation/Severance
  • Franchise Disputes
  • Gaming
  • International
  • Mergers and Acquisitions
  • Pharmaceuticals
  • Real Estate
  • Securities
  • Trusts and Estates
  • Vendor/Supplier Disputes
  • Technology
  • Trusts and Estates

We are available and eager to discuss your arbitration issues with you.


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