Arbitration is a form of Alternative Dispute Resolution (“ADR”) and can be a useful tool to conclude a dispute. Another example of ADR is mediation and you can find useful information on this here.
Arbitration is a formal process where an independent arbitrator is appointed to resolve a dispute. It follows formal rules and procedures and usually leads to a binding decision. Like mediation, the process takes place outside of the courtroom, therefore your dispute will be kept confidential.
The arbitrator acts as a neutral third party and unlike mediation, the arbitrator usually has some expertise in the area of dispute, which can be an advantage. The parties will agree either, who the arbitrator will be or how they will be selected. Whilst the arbitrator is a neutral party, their role is to consider both sides position and make a final decision which is binding on all parties.
When can arbitration be used and how to kick-start the process
The parties in a dispute will usually need to agree to proceed with arbitration however, commercial contracts will often include a clause which stipulates that arbitration should be used in the event of a dispute.
A commercial contract will often specify the steps which need to be taken before you can start an arbitration. If not, the usual practice is for one party to start the process by sending a document referred to as a “request for arbitration” or a “notice to arbitrate” to the other party involved. This notice should contain a brief description of the issue(s) and, in the event the agreement stipulates the disputing party should nominate an arbitrator, confirmation of the individual they wish to nominate.
The recipient of the notice then has the opportunity to provide a brief response, within a set timeframe and if necessary, state their choice of arbitrator.
The points of dispute must also be clearly identified – these can be factual issues, legal disputes, or disputes over the quantum of the case. The process and timetable must also be decided and all parties must ensure they comply with the agreed deadlines.
Arbitration process and hearing
The arbitrator will firstly need to consider the case and to do this, the parties will usually have to file:
- Written submissions, typically witness statements and expert reports; and
- Documents in support of the claim (or dispute).
Arbitrations can involve more than one hearing before a tribunal and the process involves each parties’ lawyers presenting the arguments and questioning the other parties’ witnesses and experts (if any) regarding their respective evidence.
Unlike the normal court process, it is difficult to predict the length of an arbitration as they can last anywhere between half a day, up to many weeks or months. This will depend on the complexities of the issues and quantum involved.
The tribunal will confirm its award after the hearing has concluded. This will detail the decision it has reached and unless the award is challenged, provides a final decision which must be adhered to.
Options to challenge/ appeal the decision
The award cannot be challenged if a party is simply unhappy with the outcome. The grounds for appeal are limited, but can include:
- The tribunal has not conducted itself properly;
- The tribunal has answered questions it did not need to, or which were not asked; and/or
- The tribunal has made a legal error.
If the above circumstances arise, parties can seek the set aside of the decision with the court, or request that the matter be reconsidered by the tribunal.
If the binding outcome of a tribunal has not been complied with by the losing party, then the successful party can proceed to take relevant enforcement action. There are a number of factors you will need to take into consideration before being able to take enforcement action and we can discuss these with you in further detail if you find yourself in the position of needing to enforce an Order.
Advantages of arbitration
The main reasons a party may choose to proceed with an arbitration are:
- Neutral consideration of the dispute;
- If you are successful, the routes to appeal an arbitrator’s decision are limited;
- An arbitrator’s decision is relatively straight-forward to enforce;
- The arbitration is confidential and does not take place in open court;
- An arbitrator should have legal knowledge of the subject-matter in dispute; and
- Arbitration can be more cost effective than litigation
Disadvantages of arbitration
To ensure that you choose the correct method of ADR for your particular circumstances, it is also important to consider potential disadvantages, such as the below:
- The costs can be high, particularly in high value and complex cases;
- In multi-party proceedings and complex matters, the arbitration process can sometimes be slower than standard litigation;
- The location of the arbitration may not be convenient (for example, a contract stipulating London as a location may be inconvenient for a firm based in the North of England); and
- It is difficult to appeal a decision if you are the unsuccessful party.
Arbitration can be an excellent tool to resolve commercial disputes, but it doesn’t work for every case… There may be other ADR routes more suitable for you and your unique circumstances.
If you have a dispute and you are unsure how it should be dealt with, a commercial contract which requires the parties to arbitrate or an Order following an arbitration that needs enforcing then we may be able to assist you.
Please call 01283 526200, alternatively you can send us a message and we will get in touch at a time that suits you.