Should You Arbitrate or Litigate During a Construction Dispute?

Your contract’s dispute resolution clause determines how long your case drags on, who decides the outcome, and whether you can appeal. Owners, contractors, subcontractors, and design professionals should compare arbitration against litigation before signing, because the choice binds you once a dispute arises.

What Is the Difference Between Arbitration and Litigation in Construction Cases?

Traditional litigation is the formal, adversarial system used to resolve legal disputes. It involves filing a complaint in a superior court or a federal district court, exchanging evidence through discovery, and submitting the case to a judge or jury in a public proceeding. The losing party can appeal their case.

Arbitration is a private process. The parties hire a neutral decision maker, a commercial construction arbitrator, who hears the evidence and issues a final decision known as a binding arbitral award. Most arbitrations proceed under the Construction Arbitration Rules of the American Arbitration Association (AAA). The parties, rather than the court, select the arbitrator, set the hearing schedule, and define the scope of discovery. A court will then confirm the award and enter judgment on it, and the result becomes enforceable like any court ruling.

Are Arbitration Clauses Enforceable in Arizona?

Yes. Arizona adopted the Revised Uniform Arbitration Act, A.R.S. § 12-3001 et seq., which governs agreements signed on or after January 1, 2011, and requires courts to enforce them. The Federal Arbitration Act also applies when a contract involves interstate commerce, which covers most commercial construction projects.

If one party files a lawsuit despite a valid arbitration clause, the other party can ask the court to enforce the clause. The judge then sends the dispute to arbitration and pauses the lawsuit until the arbitration ends. Judges grant those motions in all but rare situations, such as waiver of the clause or an unconscionable agreement.

Is Arbitration Faster Than Litigation in Arizona?

In the majority of cases, yes. According to the American Arbitration Association, arbitrators in large construction cases deliver awards about 1.7 times faster than U.S. District Courts reach trial. Across large business-to-business disputes, the median time to award was 18.7 months for cases closed in 2025, compared to a median of roughly 34 months for federal courts to reach trial.

Time converts to money in this industry. The 2025 Arcadis Global Construction Disputes Report found that the average construction dispute in the United States involves $60.1 million, and disputes in North America run about 12.5 months. For every month a claim is open, your capital remains in limbo, and your bonding capacity shrinks.

What Are the Advantages of Arbitration for Construction Disputes?

Owners, contractors, and subcontractors choose arbitration for the following reasons:

• Decision makers who know the industry. You can require an arbitrator with construction credentials, such as a construction lawyer, an engineer, or a retired judge, who understands the ins and outs of monthly payment requests, change orders, and schedule delays that push back completion dates.
• Privacy. Court filings become public records accessible to competitors, sureties, and future clients. Arbitration keeps pleadings, financial records, and the award itself confidential.
• Scheduling control. The parties and the arbitrator set hearing dates instead of waiting on a crowded court docket.
• Finality. The grounds to challenge an award are narrow, and the dispute ends when the arbitrator issues a decision.
• Streamlined discovery. Arbitrators limit depositions and document requests, which reduces legal fees in document-heavy construction claims.

The common thread is control. You are in charge of choosing the decision maker, the schedule, and the level of privacy, while the court makes those choices for you in litigation.

When Should You Choose Litigation Over Arbitration?

Litigation has advantages of its own, and, in some disputes, the courtroom is the wiser forum.

• You want appellate rights. Appellate courts are higher judicial bodies. They have the authority to correct a trial judge’s legal error. In contrast, an arbitrator’s mistake of law or fact leaves you with limited options for reversal.
• Your dispute involves multiple parties. Few defect or delay claims trace back to a single organization. The owner may blame the general contractor, the general contractor may point fingers at its subcontractors, and the insurer may act in bad faith by denying coverage. A court can consolidate all claims into a single case and determine who owes what.
• You need judicial remedies. A mechanics lien foreclosure proceeds in superior court, and judges can issue injunctions, writs, and orders against third parties.
• You want dispositive motions. Courts dismiss weak claims on summary judgment before trial. Arbitrators tend to let claims proceed to a full hearing.
• Your claim is modest. Clients pay arbitrators by the hour and share administrative fees. Those costs can exceed court filing fees on smaller disputes.

While the language is still open to change, consider whether these benefits are worth forgoing the confidentiality and speed of arbitration.

How Should Your Construction Contract Address Forum Selection?

Most companies skim the dispute resolution clause at signing. Yet that paragraph determines whether a future payment or defect claim goes to an arbitrator or a judge, and parties cannot change it after signing.

Address the following points during contract negotiations:

• Name the dispute resolution forum, the provider, and the rules, such as the AAA Construction Industry Arbitration Rules, and place the seat of arbitration in Arizona.
• Require an arbitrator who has construction law experience.
• Preserve mechanics lien rights and Prompt Payment Act remedies with express carve-outs.
• Add consolidation and joinder terms that allow you to resolve claims against subcontractors and design professionals in a single proceeding.
• Confirm that the prevailing party recovers attorney fees, which A.R.S. § 12-341.01 authorizes in contract actions.

A contract review costs far less than a year or two in the wrong forum. Raise these points during contract negotiations, long before a dispute arises.

How Does FR Law Group Help You Choose Between Arbitration and Litigation?

FR Law Group counsels owners, contractors, subcontractors, and suppliers from the first contract draft through the final resolution of any dispute.

1. Contract Drafting and Review

Before a project begins, we draft and negotiate dispute resolution clauses based on your risk, project size, and need for confidentiality. We also review your existing contracts and flag any clause that would force a dispute into arbitration or court against your interest.

2. Arbitration Advocacy

Our commercial law attorneys try construction cases before AAA panels and private arbitrators throughout Arizona. Several of them also serve as arbitrators and mediators. Having years of experience handling disputes similar to yours, they understand how an arbitrator reviews the evidence and what separates a winning claim from a losing one.

3. Traditional Litigation

Our construction litigation team prosecutes and defends breach of contract, payment, delay, and defect claims, among others, in Arizona’s state and federal courts. We have tried over 75 cases to conclusion and litigated over 1,000 disputes. Representation from a team with our track record strengthens your leverage at the negotiating table and in the courtroom.

Should You Arbitrate or Litigate? Where to Find a Commercial Construction Dispute Attorney Near You

Your contract determines whether a claim goes to an arbitrator or a jury, and that decision should serve your interests, not your opponent’s. Choose FR Law Group, based in Phoenix, AZ, to review your dispute resolution clause, evaluate a pending claim, and lock in the forum that works to your advantage. Contact us to set an appointment.

FAQs About Arbitration Versus Litigation

When should I decide between arbitration and litigation?

During contract negotiations, before signing the papers. Once a dispute arises, you are bound by the terms you already agreed to. Owners, contractors, subcontractors, and design professionals should compare the two options while the terms are still open.

Can I appeal an arbitration award in Arizona?

Strictly on narrow grounds. Under A.R.S. § 12-3023, a court can vacate an award for corruption, fraud, evident partiality, arbitrator misconduct, or an arbitrator who exceeded the authority granted in the agreement. An arbitrator’s legal or factual error is not a basis to overturn the award.

What happens if my contract has no arbitration clause?

Your dispute goes to court. Superior courts also refer smaller civil cases to court-annexed arbitration under A.R.S. § 12-133, with each county’s court rules setting the dollar limits up to a statutory cap of $65,000. Unlike contractual arbitration, either party can appeal that result and demand a trial.

Can I include both arbitration and litigation in one contract?

Yes. Many construction contracts use a hybrid clause that sends certain disputes to arbitration and routes others to court, or that lets a party choose the forum once a dispute arises. However, your legal team must draft the clauses with extreme precision to avoid legal disputes over which process applies. Using conflicting boilerplates can render your agreement void or lead to costly jurisdictional battles.