A Comparison of Economic Benefits for Companies, Conducted by SDA Bocconi – School of Management
THE AUTHOR:
Milan Chamber of Arbitration (“CAM Milan”)
Background and Summary of Findings
Arbitration is faster and can be more cost-effective than civil litigation within the Italian judicial system. This is the conclusion of a research conducted by SDA Bocconi – School of Management titled “Arbitration and State Court Justice: Comparative Cost-effectiveness”, completed in 2024 after two years of study by a team of professors and researchers with expertise in economics, law, and statistics, led by Professor Alberto Grando from Bocconi University and SDA Bocconi – School of Management.
The study analyzed 345 arbitration cases filed with the Milan Chamber of Arbitration (“CAM”) between 2019 and 2021, integrating the findings with data from three questionnaires answered by 250 participants, including lawyers, court-appointed consultants, and corporate legal advisors. It then developed a comparison between arbitration and civil litigation using an economic-financial approach based on the concept of the “financial value” of time.
According to the study, arbitration offers advantages because it concludes faster than ordinary proceedings. The average duration of an arbitration proceeding is 307 days, compared to 764 days for first-instance civil litigation, plus an additional 597 days for appeals, as confirmed by data from the Milan Tribunal and corroborated by the surveyed legal professionals. This faster resolution allows companies to release resources tied up in disputes earlier and reinvest them in other, more profitable activities.
The research adopts an economic rationality perspective, treating the cost of the proceeding as an investment made to achieve the recognition of a right. The compensation awarded at the end of the process represents the return on this investment. Once the arbitration process concludes, the awarded amount can be reinvested during the remaining time that would have been required to resolve the case through ordinary litigation.
Research in Three Phases
The study was divided into three phases:
- In the first phase, researchers analyzed data on the value, duration, and costs of 345 CAM arbitration proceedings—both ongoing and closed—administered from 2019 to 2021.
- The second phase involved gathering more detailed information, particularly on the costs and duration of both arbitration and litigation proceedings, by distributing three questionnaires to distinct respondent groups.
- The third phase focused on comparing data from the two types of proceedings. This comparison used a business-oriented approach, enabling a clearer understanding of the relative advantages of arbitration and ordinary justice.
First Phase and Main Evidence
In the first phase, data analysis revealed that CAM arbitration cases have an average duration of 307 days, significantly shorter than ordinary litigation. Even in complex cases, such as international disputes with an average duration of 367 days or high-value claims averaging 585 days, arbitration concluded in less than two years. The average total cost of CAM proceedings is €38,000, rising to €61,000 when resolved with a final award. The CAM fee averages €8,000, increasing to €10,500 for final award cases. For disputes valued between €52,000 and €260,000—the most frequent category—the total cost averages just over €3,000 for cases resolved without an award and just under €13,000 for those concluded with a final award. Additionally, 74% of analyzed cases, representing the majority of proceedings, were completed within 5 months to a year with costs between €4,000 and €16,000. In cases resolved with a final award, the duration and cost of the proceeding were proportional to the value of the dispute.
Second Phase: The Three Questionnaires
The second phase involved the analysis of responses to questionnaires distributed to legal professionals. Arbitration was widely perceived as faster than first-instance civil litigation, albeit more expensive. However, the finality of arbitration awards, equivalent to a second-instance court judgment, makes arbitration less costly overall when considering the full timeline of ordinary proceedings.
Third Phase: The Financial Comparison and Economic Approach
In the third phase, the comparison between arbitration and ordinary litigation was conducted using an economic analysis model based on discounted cash flows, a methodology widely applied in investment evaluation. The study treated the cost of the proceeding as an investment made to achieve the recognition of a right, with the awarded compensation serving as the return on this investment. The hypothesis suggested that the awarded amount could be reinvested during the additional time that ordinary litigation would require to reach a resolution. The study also highlighted that the actual economic return for the winning party could exceed the reported findings, as costs are typically borne by the losing party.
This financial analysis emphasized the value of time as a critical factor. Arbitration allows the winning party to reinvest resources earlier, creating an opportunity cost for those still bound by lengthy litigation. The study provided key insights into when arbitration or litigation might be more advantageous. Ordinary litigation is more suitable when the Procedural Margin, the difference between the dispute value and total costs, is minimal and does not generate significant financial returns. Arbitration, on the other hand, becomes more advantageous as the dispute value and reinvestment potential increase. It is particularly preferable when the value at stake is substantial and the ability to release resources earlier enables reinvestment in alternative, profitable ventures.
The research ultimately underscores that decisions regarding the most cost-effective method for resolving disputes should consider multiple factors, including legal implications, time, costs, dispute value, and the opportunity to reinvest awarded amounts promptly in alternative, lucrative projects.
ABOUT THE AUTHOR
The Milan Chamber of Arbitration (CAM) is one of Europe’s leading arbitration institutions, offering efficient and innovative dispute resolution services. Established by the Milan Chamber of Commerce, CAM provides a full range of alternative dispute resolution (ADR) solutions, including arbitration, mediation, and dispute boards, ensuring effective resolution of commercial disputes at both national and international levels.
With a strong reputation for excellence, CAM administers cases under its Arbitration Rules, designed to promote efficiency, flexibility, and transparency. The institution also supports businesses and practitioners through specialized training, thought leadership, and publications on arbitration and ADR.
CAM is also actively engaged in the organization of training events, conferences, and workshops aimed at fostering dialogue and knowledge-sharing among arbitration professionals, academics, and businesses.
Committed to innovation, CAM integrates digital tools for case management, including online mediation and remote hearings, making arbitration more accessible and adaptable to modern business needs.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
