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What Is the Difference between Arbitration and Adjudication?

By DM Gutierrez
Updated Jun 04, 2024
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The primary difference between arbitration and adjudication is the person or entity that makes the decision in a legal dispute. In arbitration, the disputing parties agree on an impartial third party—an individual or a group—to hear both sides and resolve the issue. In adjudication, the decision is the responsibility of a judge, magistrate, or other legally-appointed or elected official.

Arbitration is often used as a way to settle contract disputes. Parties signing a contract often agree to the use of arbitration to decide if a contract has been breached or whether it can be terminated. By choosing arbitration to settle disputes, the parties agree not to pursue their complaints in a court of law. If arbitration is not chosen, the parties' only recourse is typically adjudication.

The actual process of arbitration and that of adjudication is much the same. Mediation through a arbitration hearing is similar to a court hearing. Each party brings evidence and witnesses before the agreed-upon arbiter and makes his or her case. The arbiter weighs the evidence and draws a conclusion, either deciding for one of the parties or proposing a unique solution. Contracts usually include a clause that the parties agree to comply with the arbiter’s decision, typically the phrase ‘binding arbitration.’

Adjudication is usually a legal trial, also referred to as court-based litigation. Disputing parties appear before an appointed or elected official and plead their respective cases. Like the arbiter in arbitration, an adjudicator weighs the evidence and issues a determination in favor of one of the parties. One difference between arbitration and adjudication is that the parties in an adjudicated decision are compelled by law to comply. If the losing party refuses or is unable to fulfill the mandate of the decision, he or she may be fined or jailed.

Another difference between arbitration and adjudication typically involves the amount of time taken to reach a resolution. Since arbitration does not generally depend on time allotted for the legal calendar, it may be a quicker process. Adjudication, on the other hand, depends largely on the number of cases the judge assigned to the case has. This time constraint sometimes causes adjudication to take months or years.

Choosing between arbitration and adjudication is often determined by monetary factors. Since adjudication is a legal process, usually requiring legal filing fees and the employment of litigating attorneys, court costs can be high, increasing as the trial progresses. Arbitration is generally lower in the costs associated with case presentation.

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Discussion Comments
By anon968102 — On Aug 31, 2014

Adjudication is a quick process of resolving a conflict that tends to have a payment issue, e.g., the amount of work claimed or variations. usually between head contractor/ subcontractor to force someone to pay.

If the parties are arguing over whether something was designed right or contract clauses, they would usually go to arbitration because it may not be about getting money or payment. I t may be about continuing work on a job site.

By anon292048 — On Sep 18, 2012

I am bit confused on adjudication definition, especially with respect to its applicability in construction projects as dispute adjudication boards where it appears to be the same, except for its tenure. Can you please clarify?

By Misscoco — On Sep 15, 2011

@Clairdelune - I kind of understand, so I'll give your question a try.

If two businesses or organizations have a contract, they usually say in the contract that if there is a disagreement, they will use arbitration and mediation to correct the problem.

If the parties don't put it in the contract, and there is a conflict, they might have to take the adjudication route.

Almost always, with union contracts, the disagreements are settled by arbitration because it is in the contract between employees unions and their management that they will settle this way.

So if management thinks an employee is incompetent or negligent, an arbiter is brought in to settle the dispute between management and the union who represents the employee. This can be a long and tedious process.

By Clairdelune — On Sep 14, 2011

Looking at the difference between arbitration and adjudication is a little confusing. I can see that with arbitration, the parties involved present their case to someone, who is not involved in the case.

And with adjudication, the parties with the conflict present their stories to a judge, and follow the rules of court.

I don't really understand when two people or groups would choose arbitration instead of adjudication. Anyone understand this?

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