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Arbitration
Arbitration is an ancient and effective method of resolving disputes in commerce and industry and between individuals.
Arbitration is the only means of dispute resolution which is an alternative to litigation where the parties require an award that is…
- Final
- Binding
- Enforceable Summarily in the Courts
Put simply, arbitration is the judicial resolution of a dispute by a person other than a judge in court (i.e. an arbitrator). This person is independent and impartial and is selected by the parties, or on their behalf, on the basis of technical expertise, reputation and experience in the field of activity from which the dispute stems. An arbitrator must exercise judicial capacity…
- having regard to the parties’ arguments and evidence
- in accordance with natural justice
- in accordance with the law
Unlike a judge, an arbitrator will be a technical expert in the field of the dispute and, as such, is likely to take less time and require less evidence to enable him/her to understand to the technical details of the dispute. It also enables the custom and practice of the trade to be brought to bear on the final outcome.
A dispute (legal, technical or both) is referred to arbitration under an arbitration agreement between the parties. This may take the form of a clause in the contract (some standard forms of contract include such a clause) or of a short free-standing agreement (which can be made after the dispute has arisen). If the agreement is in writing and relates to a dispute in England and Wales, the Arbitration Acts 1950-1979 (as amended) will apply.
Flexibility and simplicity are the very essence of arbitration procedure. Procedural rules for an arbitration are thus a matter of choice for the parties and can be tailored to suite the needs of the situation.
Procedures will range from formal hearing (similar to litigation) to abbreviated hearings, to documents only, perhaps with the arbitrator having the power to inspect samples or conduct a site visit.
The arbitrator’s award will not only state whether the remedy sought has been granted (e.g. damages, specific-performance) but also rule on the parties’ liability as to costs. Cost in arbitration are two fold:
- Cost of the award (arbitrators fees and expenses)
- Cost of the reference (the parties’ own costs)
As in the courts, the normal rule is that costs flow from the event, i.e. an unsuccessful party must bear the costs, but the arbitrator has a judicial discretion to depart from this. The parties may agree (only after the dispute has arisen) to stand their own costs whatever the outcome of the award. This course may be particularly attractive where the dispute is over a relatively small amount of money and the parties do not wish to be legally represented. The advantage being that the loser will not incur costs greater than the amount of the initial dispute. In relatively straightforward cases (egg quality of workmanship) the arbitrator may be able to quote a lump sum for his fee at the outset. The parties will not then be dissuaded from the proper resolution of the matter by the prospect of disproportionate costs should they lose.
The arbitrator’s award may only be challenged in the High Court, on limited grounds, viz:
- Error of law (and the parties can agree at the commencement of proceedings that there will be no appeal on a matter of law).
- Procedural misconduct
- Failure to deal with matters referred to in arbitration
If you wish to obtain further information about arbitration contact Keith Sanger or the Chartered Institute of Arbitrators.
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