Arbitration or Litigation? How to Choose the Right Forum for Your Commercial Disputes

Key takeaways

•       The choice is made when you sign: Arbitration depends on agreement. Once a valid arbitration clause covers a dispute, an English court must stay court proceedings brought in breach of it, save in narrow cases.

•       Neither forum is always better: Arbitration offers privacy, a choice of decision-maker and easier enforcement in many countries. Litigation offers public precedent, powers over third parties, joinder and a right of appeal.

•       Enforcement often decides it: Where the counterparty and its assets are located matters as much as where the dispute is heard. Check which treaties connect England with the countries where you may need to enforce.

•       Draft the clause properly: Specify the seat, the rules, the number of arbitrators and, since the Arbitration Act 2025, any law you want to govern the arbitration agreement itself.

Most dispute resolution clauses are agreed at the end of a negotiation, when everyone is tired and nobody expects a dispute. Yet the clause decides who will hear a future claim, how long it will take, whether anyone will see the outcome and, often, whether a judgment or award can be enforced at all. For a technology business selling across borders, that choice can matter more than any warranty or liability cap.

This article explains how arbitration and litigation in England differ, where each tends to work best, and what to look for when drafting or reviewing a dispute resolution clause. Our related articles explain the Arbitration Act 2025 reforms, escalation clauses and enforcing judgments and awards abroad.

What is the difference between arbitration and litigation?

Litigation is the resolution of a dispute by the state courts. In England and Wales, high-value commercial and technology disputes are usually heard in the Business and Property Courts in London, including the Commercial Court and the Technology and Construction Court. Proceedings are generally public, judgments are published, and the losing party can usually seek permission to appeal.

Arbitration is a private process in which the parties agree that a tribunal of one or more arbitrators will decide their dispute and that the resulting award will be final and binding. Arbitration seated in England and Wales is governed by the Arbitration Act 1996, as amended by the Arbitration Act 2025. Its guiding principles are that disputes should be resolved fairly by an impartial tribunal without unnecessary delay or expense, that the parties should be free to agree how their disputes are resolved, and that the court should not intervene except as the Act provides (section 1).

The two processes are not wholly separate. The courts support arbitration, for example by granting urgent injunctions under section 44, and supervise it through the limited rights to challenge an award. But the starting point is party autonomy: once you have agreed to arbitrate, you are expected to do so.

Can you go to court if you have agreed to arbitrate?

Generally not. Under section 9 of the 1996 Act, a party to an arbitration agreement who is sued in court over a matter covered by the agreement can apply for a stay, and the court must grant one unless it is satisfied that the arbitration agreement is “null and void, inoperative, or incapable of being performed”. The stay is mandatory, not discretionary.

The courts also read arbitration clauses broadly. In Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, the House of Lords held that the construction of an arbitration clause should start from the assumption that the parties, “as rational businessmen”, intended any dispute arising out of their relationship to be decided by the same tribunal, unless the language makes clear that certain questions were excluded (at [13]). If you want some disputes, such as intellectual property claims or urgent injunctions, to stay with the courts, the clause must say so clearly.

Most commercial disputes can be arbitrated, including many shareholder disputes. In Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855, the Court of Appeal stayed an unfair prejudice petition under section 994 of the Companies Act 2006 in favour of arbitration. An arbitral tribunal cannot, however, wind up a company or make orders binding on shareholders who are not parties to the arbitration, so some relief remains with the court.

When does arbitration tend to work best?

• Cross-border contracts. Where the counterparty is based abroad, a neutral forum avoids either side litigating in the other’s home courts. An award made in England can usually be enforced in the many countries that are party to the New York Convention, under a regime with limited grounds for refusal (see section 103 for the English equivalent).
• Confidential subject matter. Arbitration hearings are private. That matters where a dispute will expose source code, algorithms, pricing or a failed product launch. As the Supreme Court noted in Halliburton v Chubb [2020] UKSC 48, arbitration is generally conducted in private with limited public oversight.
• Technical disputes. The parties can choose arbitrators with relevant expertise, for example in software development, robotics or engineering, rather than accepting whichever judge is allocated.
• Finality. There is no general right of appeal. Challenges are limited to lack of jurisdiction, serious irregularity and, unless excluded, appeals on points of English law with permission. The LCIA and ICC rules, for example, contain waivers that exclude it.

When does litigation tend to work best?

• Multi-party disputes. Courts can join third parties and hear connected claims together. An arbitral tribunal’s jurisdiction depends on consent, so a supplier, subcontractor or guarantor who has not signed the arbitration agreement cannot usually be brought in.
• Straightforward debt claims. Where the counterparty has no real defence, court proceedings can lead to summary judgment and enforcement in England quickly and at a modest cost.
• Setting a precedent. A published judgment on the meaning of a standard-form contract can bind future dealings. An arbitral award cannot do this.
• Costs. In litigation the parties do not pay for the judge or the hearing room. In arbitration they pay the tribunal’s fees and any institutional charges, which can be significant in a large case.
• Appeals. If you want the chance to correct a wrong decision on the law or the facts, litigation offers it. Arbitration largely does not.

Some differences have narrowed. Since 1 August 2025, tribunals seated in England have had an express power to dispose summarily of claims or issues with no real prospect of success under section 39A, unless the parties agree otherwise. Many institutional rules also provide for emergency arbitrators, whose orders now have statutory support under section 41A.

Why does enforcement matter so much?

A judgment or award is only as good as your ability to collect it. Before choosing a forum, consider where the counterparty is incorporated and, more importantly, where its assets are. English court judgments are enforceable in many countries through the Hague Conventions and bilateral registration schemes, but coverage is patchy. The New York Convention coverage for arbitral awards is far wider. Our separate article explains the enforcement routes in more detail.

What should a good arbitration clause say?

An effective clause is short but precise. It should identify:

• The seat. The legal home of the arbitration, which determines the supervising courts and the procedural law. Choosing London brings the 1996 Act and the English courts’ supervisory role.
• The law of the arbitration agreement. Since 1 August 2025, section 6A provides that the arbitration agreement is governed by the law of the seat unless the parties expressly agree otherwise, and a choice of law for the main contract does not count as such an agreement. This replaces the common law test in Enka v Chubb [2020] UKSC 38.
• The rules. Institutional rules, such as those of the LCIA or ICC, provide administration and default procedures. Ad hoc arbitration is possible but needs more drafting.
• The tribunal. One arbitrator or three, and any required qualifications or expertise.
• Language and scope. The language of the proceedings and any carve-outs, for example for urgent court relief or intellectual property claims.

Choosing a forum: a practical checklist

When agreeing or reviewing a dispute resolution clause, businesses are likely to need to consider:

• Counterparty and assets. Where the other side and its assets are located, and which enforcement treaties apply there.
• Confidentiality. Whether a public dispute would harm your reputation, investors or customers.
• Other parties. Whether claims are likely to involve subcontractors, guarantors or group companies who are not party to the contract.
• Value and urgency. Whether the likely disputes justify the cost of a tribunal, and whether you may need urgent relief.
• Expertise. Whether a technically qualified decision-maker would help, or whether some issues suit expert determination instead.
• Consistency. Whether the clause matches the dispute provisions in related agreements, so that one dispute is not split between forums.
• Drafting. A clear seat, rules, number of arbitrators, language and governing law of the arbitration agreement.

At Maybrook Law, we draft dispute resolution clauses with the dispute in mind, and we act for clients in commercial litigation and international arbitration when disputes arise. Because we also advise on the underlying transactions and technology, we can help you choose a forum that fits how your business operates and where your counterparties are. If you are negotiating a contract or facing a dispute, we would be pleased to discuss your options.

This article reflects the law as at 6 November 2026. Our insights, articles and guides do not, and are not intended to, constitute legal advice or be an exhaustive review of all legal developments. Although every effort is made to ensure that the information provided in this article is accurate as of the publication date, please be aware that this area of law may be subject to change. Please seek legal advice before applying the information provided to any specific circumstances, transactions or legal issues.