What is Arbitration?
Arbitration is a procedure by which the parties to a dispute appoint an independent and neutral arbitrator to decide on the dispute. It is a formal and legal process and is governed by its own rules similar to court rules. The aim of arbitration is to provide a fair resolution of a dispute by impartial means.
It is common that legal agreements have an “arbitration clause” ie that in the event of a dispute relating to that agreement, the parties will refer the dispute to arbitration rather than having to go to court. In that case, arbitration may be the only possible avenue and court proceedings may not be allowed to continue if there is a binding arbitration clause.
Who is the arbitrator?
The parties to arbitration are generally free to choose who they want to be the arbitrator and will try to agree on who that should be. If they cannot agree, then a professional body can appoint an arbitrator instead. For example, if someone with a surveying background was required, the President of the RICS could appoint an arbitrator.
It is also often the case that the parties would look to someone with specific technical, qualifications, expertise and knowledge of the subject matter of the dispute, for example, a QS in a construction dispute. Also, experienced lawyers or judges can act as arbitrators provided that they have the relevant qualifications.
How does arbitration work?
The arbitrator will make orders setting out the procedure to be used. Commonly, this would be similar to the court process such as setting out the parties’ cases, disclosing documents, witness statements and then a formal arbitration hearing. The arbitrator will hear both sides’ evidence and arguments and make a decision, which the parties will have agreed to be bound by, by way of arbitration agreement.
When should arbitration be used?
An advantage of arbitration can be flexibility and an opportunity to resolve disputes in a timely and cost effective way. At the same time the legal framework for arbitration ensures that the principles of equal treatment and the right to be heard are protected throughout.
It could also be appropriate where court proceedings would be lengthy and expensive. In arbitration, parties are able to agree their own procedures such as the timings of steps to be taken, the level of legal representation and the extent of oral argument.
It might also be appropriate where the parties feel that specific expertise in the subject matter of the dispute is important or where confidentiality is required, rather than public court proceedings.
When is arbitration inappropriate?
It might be the case that efficient, quick and inexpensive justice is provided by the local courts. It needs to be remembered that while arbitrators do not charge fees in the same way that courts do, however, an arbitrator will charge for his or her time spent in dealing with arbitration on an hourly rate basis similar to that of a lawyer which a court wouldn’t. The relative costs of each need to be carefully weighed up.
It is also unlikely to be appropriate where one party is expected to be deliberately obstructive. Similarly, it is possible that a court procedure may confer a particular advantage (eg full disclosure of documents or a coercive order capable of immediate enforcement) and again the advantages and disadvantages of each would need to be carefully considered.