Big changes are coming to the High Court Rules from 1 January 2026 (summarised here). The reforms are designed to make litigation more efficient and cost effective by streamlining key processes. One of the most significant changes is the new “enhanced initial disclosure” process, which will require parties to exchange core documents right at the outset of a case to help clarify issues early.

As these changes take effect, it is a good time for parties to consider what dispute resolution process best suits their needs. For those who value greater control over procedure and timing, arbitration remains an attractive alternative to litigation. It offers a confidential and flexible way to resolve disputes, with decisions made by an independent arbitrator(s) chosen by the parties.

In this article, we outline the key advantages and disadvantages of arbitration compared with litigation and highlight what parties should include in their arbitration clauses to make sure they are clear, effective, and enforceable. 

Advantages of arbitration

Because arbitration is tailored by the parties, it offers several key advantages over traditional litigation:

• Speed and efficiency: arbitration is generally faster and more flexible. The parties can choose their arbitrator and agree on procedures and timetables that work for them, avoiding many of the delays common in Court proceedings. For example, arbitration does not include an automatic right to discovery of documents. This flexibility often results in disputes being resolved more quickly, and at a lower overall cost. To illustrate this point, a New Zealand survey of arbitrations conducted between 1 January 2021 and 31 December 2022 found that domestic arbitrations involving sums between $30,000 and over $3 million took an average of 10.65 months to complete.^[1]  By comparison, in 2023 the average time between filing a civil claim in the Auckland High Court and reaching trial was 604 days (approximately 20 months).^[2]
• Expertise and specialisation: parties can appoint an arbitrator with expertise or experience in the relevant area of law or industry to their dispute. This ensures the decision-maker is experienced in the technical details and practical realities of the dispute. 
• Confidentiality: arbitration keeps disputes private. Arbitration proceedings are generally not public, allowing parties to protect commercially sensitive information and maintain their privacy and reputation.
• Overseas enforcement of arbitral awards: New Zealand is one of 170 contracting states to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The New York Convention governs the recognition and enforcement of arbitral awards and requires Courts in contracting states to give effect to arbitral awards made in other contracting states. This framework promotes a generally pro-enforcement approach to arbitral awards, meaning that in some cases, an arbitral award may be easier to enforce internationally than a Court judgment. 

Disadvantages of arbitration

While arbitration offers flexibility and confidentiality, it also has some drawbacks compared to litigation. All parties to the dispute have to agree to attend arbitration – if they don’t, you can’t force another party to have the dispute resolved by an arbitrator (unlike Court). Arbitral awards do not establish legal precedent, which can be a disadvantage where parties seek guidance on recurring issues or clarification of the law. Arbitration can also be less suitable for complex, multi-party disputes, as consolidating proceedings or joining additional parties is often difficult without consent. In addition, parties must pay arbitrator’s fees and arrange and pay for an arbitration venue and a stenographer, which can make an arbitration hearing more expensive in some cases. 

What should parties include in their arbitration clauses

Because arbitration is a consensual process, it only works if the parties agree in writing to resolve their disputes through arbitration. This agreement is usually contained in an arbitration clause in a contract.

To make sure an arbitration clause is valid, enforceable, and operates as intended, it should clearly cover the following key components:

• Intention to arbitrate: the clause must make it clear that the parties intend for all (or certain) disputes between them to be resolved by arbitration, rather than through the Courts.
• Scope of the arbitration agreement: it is essential for an arbitration agreement to define what types of disputes fall within its scope. In most cases, it’s best to draft this broadly so that all disputes between the parties (whether contractual or tortious etc) are covered. This avoids parts of a dispute being split between different forums, which can add cost and delay. In some situations, however, parties may prefer to keep certain matters in a public forum. That’s fine, but narrowing the scope requires careful drafting to prevent jurisdictional challenges or overlapping proceedings.
• Seat of the arbitration: every arbitration must be linked to a legal system - this is called the “seat” of the arbitration. The seat doesn’t have to be where the arbitration hearing is physically held, or even where the contract is performed. The law of the seat determines key procedural issues, such as:
  • which Courts have supervisory powers over the arbitration;
  • whether and how awards can be appealed or challenged; and
  • whether the proceedings and award are confidential. 
• Number of arbitrators: the parties can agree on how many arbitrators will decide their dispute. Typically, there will be one or three arbitrators, depending on the complexity of the issues. There should always be an odd number to avoid deadlock.
• Identity of Arbitrator(s): an arbitration clause should set out a clear mechanism for appointing the arbitrator(s), including a mechanism for independent selection if the parties are unable to agree on appointment within a specified time.
• Appeal rights: to avoid uncertainty later on, an arbitration clause should specify what rights of appeal will apply to an arbitral award (if any).

Get in touch

Taking the time to get an arbitration clause right at the outset can save significant cost, delay, and uncertainty later on.

If you’d like to talk to one of our experts about your arbitration clause or arbitration as an alternative to litigation more generally, please get in touch.