Whether a dispute involves contracts, intellectual property, or other commercial matters, finding effective ways to resolve disputes is imperative for the smooth operation of any business. One method that has gained prominence as a viable alternative to traditional court proceedings is arbitration.
This article explains what arbitration is, shedding light on its intricacies and benefits, plus covering a few frequently asked questions.
What does arbitration mean?
Arbitration is a form of Alternative Dispute Resolution (ADR) that allows parties embroiled in a dispute to present their case before a neutral third party – the arbitrator. Unlike court proceedings, which are often time-consuming and subject to complex legal procedures, this process offers a streamlined and efficient way to resolve disputes. This is because arbitration is less formal and allows for more flexible scheduling, making it particularly appealing to small businesses seeking a swift resolution of its dispute.
How arbitration works
The arbitration process involves several key steps:
1. Initiating arbitration
Typically, parties choose arbitration as a resolution through an arbitration clause in their contracts. This clause outlines the conditions under which disputes will be referred to arbitration. Alternatively, parties can agree to the process after a dispute arises.
2. Arbitration Agreement
Both parties must agree to enter into an Arbitration Agreement. This agreement solidifies the parties' commitment to resolving the dispute through arbitration and outlines the rules and procedures governing it.
3. Selection of arbitrator
A crucial aspect of the process is the selection of the arbitrator. The arbitrator is a neutral third party responsible for hearing both sides of the dispute and making a binding decision – the arbitration award.
4. Arbitration hearing
Similar to court proceedings, parties present their cases and evidence during an arbitration hearing. The arbitrator listens to both sides and evaluates the evidence presented.
The arbitrator delivers the arbitration award based on the evidence and arguments presented. This decision is final and legally binding.
Do both parties have to agree to arbitration?
Yes, both parties must agree to arbitration. This ensures that the process is voluntary and all parties are committed to abiding by the arbitrator's decision. The agreement to the process can be established through an arbitration clause in a contract or through a separate agreement following a dispute.
Is arbitration legally binding?
Yes, as mentioned above, arbitration is legally binding. Once parties agree to arbitration and an arbitrator's decision is made, it holds the same weight as a court judgment. This finality provides certainty and closure to the dispute, eliminating the possibility of lengthy appeals.
Parties to an arbitration may agree on a settlement between themselves. If this occurs, the terms may be incorporated into an award to facilitate enforcement (known as an "agreed award" or an "award by consent").
How does mediation differ from arbitration?
Mediation is another form of ADR that involves a neutral third party. However, in mediation, the mediator's role is to facilitate communication between parties and help them reach a mutually acceptable resolution. Unlike arbitration, where the arbitrator makes a binding decision, mediation is non-binding and parties retain control over the outcome.
Does an arbitrator have to be a lawyer?
No, an arbitrator doesn’t have to be a lawyer, although legal expertise can be valuable. Arbitrators often possess specific industry knowledge related to the dispute at hand. This expertise helps them better understand the intricacies of the case and make informed decisions.
How long does arbitration take?
One of the benefits of arbitration is its efficiency. While court proceedings can stretch over months or even years, arbitration is generally quicker. The duration of arbitration depends on the complexity of the case, the availability of parties and the arbitrator, and the parties' cooperation in presenting their cases.
Are arbitration proceedings confidential?
Confidentiality in arbitration is a key advantage. Unlike court proceedings, which are often open to the public, the process offers a more discreet environment. This is especially beneficial for small businesses that value privacy in their commercial matters.
Can a party withdraw from arbitration?
Once the arbitration process has begun, it isn’t as straightforward for parties to withdraw as it is in mediation. The process is designed to provide a conclusive resolution, so parties must generally see it through. However, there might be circumstances under which withdrawal is possible and legal advice should be sought in such cases.
Can arbitration be appealed?
In most cases, arbitration awards are final and binding. However, limited grounds for appeal might exist in situations with serious irregularities in the process or if the decision is believed to be against public policy.
What is international arbitration?
International arbitration shares the same principles as domestic arbitration but involves parties from different countries. The process is especially effective at resolving disputes involving a cross-border element. This is thanks to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NY Arbitration Convention), which provides a regime for the enforcement and recognition of arbitral awards within contracting nations (which include most of the EU States, China, India and the United States).
Get legal assistance from LawBite
Arbitration is a robust form of alternative dispute resolution. Our solicitors can advise and represent you before, during, and after domestic or international proceedings, ensuring your best interests are fully protected. We can also help you to source an arbitrator.
Our lawyers are experts in arbitration, and they can:
- Draft Arbitration Clauses to go in contracts
- Help persuade the other party to accept arbitration
- Help you source an accredited third-party Arbitrator
- Help you prepare for the arbitration process
- Attend any meetings or hearings with the Arbitrator
- Help you present or defend the claim
- Help you negotiate a settlement of the claim with the other side
- Provide a neutral Arbitrator to handle the process