Simply put - arbitration is a way of resolving disputes without the cost and expense of formal litigation. Let our brilliant team help you see whether arbitration can work for you - whichever side of the dispute you are on. Call us today.
Business disputes are often best resolved by a discussion followed by an agreement, or alternatively by adhering to the terms of a shareholders agreement which may provide for dispute resolution mechanisms.
However – where you are unable to reach an agreement then matters may become more contentious and it can be sensible to instruct a solicitor to continue those negotiations to try and take the heat out of the situation and help reach an agreement or settlement. This is particularly true if the disputes involve co-directors, co-owners, or the shareholders, directors, employees, creditors or other stakeholders you are reporting to,
These steps can be further escalated to alternate dispute resolution mechanisms, including
- without prejudice meetings; and
Often, if these negotiation (or pre-action) steps are unsuccessful, then most businesses and individuals consider the next step must be legal proceedings.
However, formal legal proceedings are not the only option available under English and Welsh law. There is also arbitration.
What are the distinct elements in arbitration?
Arbitration is a private and consensual system of dispute resolution.
The importance of privacy
As a result of arbitration being private and confidential
- no external reports or connected parties can visit hearings or seek copies of judgments and orders,
- the decision made does not provide a “judgment” which could potentially bind other related disputes; and
- it avoids publicity for the paying party as to any alleged wrongs done by them.
For this reason, it is an important alternative to formal litigation, especially when a dispute exists between international parties and the strength, coherency and consistency of UK law is needed to help resolve the dispute, but without unwanted publicity.
At its simplest, arbitration is a method of dispute resolution whereby the parties at dispute agree to submit their dispute to an independent third party i.e. the arbitrator and be bound by their judgment.
- the arbitrator is normally someone with professional qualifications and a more sophisticated degree of expertise in the necessary field.
- this makes Arbitration more useful for some types of specialist dispute because the arbitrator can have more specialist knowledge than a judge in “traditional” litigation proceedings where he / she may have little or no expertise in the area of dispute and determine matters more objectively without accounting for technical or practical aspects unless these are raised by the barristers instructed.
A quick overview of the arbitration process
It is common for smaller disputes to be heard by a sole arbitrator, and in larger disputes, a panel of 3 arbitrators are often chosen.
The parties to the dispute
- can then choose their own rules and timetable to the dispute, usually known as an ad hoc arbitration, or
- look to an established arbitral institution and adopt or amend those rules to suit their purposes.
- Both sides to the dispute will then prepare their arguments for consideration by the panel of arbitrators or sole arbitrator,
Following this process, a final and binding award will be made in respect of the dispute.
It is seen as a simpler, quicker alternative to litigation. On this basis a substantial amount of national and international commercial agreements provides for dispute resolution by way of arbitration, which can reduce the associated costs and delays (which may not be preferable to commercial entities.
Benefit to international parties of arbitration
Arbitration is an excellent procedure to resolve disputes between international parties. This is because it the dispute can be resolved (subject to the terms of any arbitration agreement or clause providing for arbitration) in any court internationally (subject to the laws of that country) applying the legal principles relevant to the dispute.
In England and Wales, arbitration of international disputes in any country can exist, with experts in the relevant legal system providing evidence on the legal principles (despite the fact they may not mirror the laws in the UK).
Possible downsides to be aware of in the arbitration process
Arbitration is carried out under agreement by an independent arbitrator. If you do not agree with the arbitrator’s decision, there are very limited grounds to appeal the arbitration decision. This is different to normal court proceedings, where an application can be made to set aside an order or appeal a judgment.
Simultaneously, from the benefitting party’s perspective, an arbitration award can be less enforceable. Whilst the New York Convention (and, in the UK, the Arbitration Act 1996) provides for many jurisdictions in which an arbitration award will be recognised, not all countries are subscribed to this agreement.
Arbitration is less flexible in these respects and careful consideration is always needed of these aspects before proceeding. Our specialist team is able to advise you on this.
Binding effect of arbitration decision
Once an arbitrator’s decision is made, it is final and binding, which is agreed by the parties at the inception of the process to allow the parties certainty.
It is for this reason that arbitration (in whatever form or guise) has historically been a popular method of dispute resolution between merchants and traders due to its simplicity and informality. Today, it is one of the main ways of dispute resolution adopted by individuals, companies and states across the world.
- In the UK it is private, independent, free from corruption and forms a prescribed, quick and efficient solution for companies to resolve any disputes.
- Unlike litigation, there is little ability to abuse the process and the parties are restrained to very limited grounds to make their representations and argue their points, all of which are done over a closely defined timescale.
Should you have a matter that requires arbitration, at FWJ we will be able to assist you with the commencement of the arbitration process through to conclusion. If required, FWJ may also consider alternate litigation funding methods to assist you with the funding of the arbitration process.