#16053 - Arbitration 1 - BPC Alternative Dispute Resolution

Arbitration 1

• Arbitration = an adjudicative procedure by which an impartial tribunal decides the outcome of a dispute between parties, following their voluntary submission to that procedure.

• Contractual basis: Based on an agreement between the parties to refer a dispute/difference to impartial arbitration for a decision.

  • Adjudicative CF mediation & negotiation; somebody makes a decision for the parties.

  • Impartial tribunal general duty, s33 Act.

  • Must be a dispute between the parties s6 Act, the arb agreement must refer a ‘dispute’ (including differences, s82).

  • Voluntary/consensual though once they are in arbitration, they cannot leave. Is based on an agreement between the parties to refer the dispute to arbitration.

• Arbs are based on an agreement between the parties, to have their dispute decided by impartial arbitrators.

• Arbitration is NOT a step on the pathway to litigation/trial at court. You might negotiate or mediate before court proceedings if they are unsuccessful; but arbitration is not a pathway to litigation. You might end up in court after arbitration or during arbitral process, but it is not a step to litigation.

• Strong public policy in favour of upholding arbitration agreements, which is supported by:

  • (1) the idea that the arbitration clause in a contract is separable from the rest of the substantive contract;

  • (2) by the jurisdiction to stay court proceedings that are commenced in breach of an arbitration agreement.

• If parties agree to arbitration ,this implies that they want their disputes decided:

  • By a tribunal they have chosen

  • In a neutral location and with neutral arbitrators

  • In privacy

  • By the arbitrators speedily & efficiently

  • With light but efficient supervision by the courts.

Arbitration v Litigation

• Arbitration is most like litigation CF negotiation/mediation. Is a sort of private version of litigation.

• Similarities with litigation:

  • is adjudicative;

  • 3^rd party makes a decision;

  • can be pleadings/rules/procedures which might look like rules of court.

• Differences with litigation

  • Based on agreement dispute will be referred to arbitration only if agreed by the parties.

  • It is not a step on pathway to litigation.

  • Speed of the processes:

    • eg you might be kept waiting to appear before court; but might find an arbitrator who is free quickly.

  • Cost

  • Degree of party autonomy

    • If litigating in Eng & Wales, will be litigating in accordance with the CPR. Rigidity.

    • Parties can agree to have flexible process/rules etc.

  • Arbitrators appointed by the parties (or through an agreed mechanism)

Egs, arbitral institutions

• CEDR (Centre for Effective Dispute Resolution)

• CIA (Chartered Institute of Arbitrators)

• ICC (International Chamber of Commerce)

• LCIA (London Court of International Arbitration)

• UNCITRAL (United Nationals Commission on International Trade Law).

Pros & cons of Arbitration

ADVANTAGES of arbitration CF litigation

• Privacy & Confidentiality

  • Arb proceedings are confidential (subject to certain exceptions), CF court is public

  • The public has no right to attend a hearing before an arb tribunal.

  • Some parties might want disputes determined out of the public gaze.

• Choice of the tribunal (appointed by the parties/an agreed mechanism, CF by the state as in court)

  • The right to choose, or to have a say, in the choice of one or one members of the arbitral tribunal is an advantage.

  • Even if the degree of influence is minimal because the choice is left to an appointing authority, there has nonetheless been some involvement in the selection process, by agreeing to that appointing authority, and the parties may take comfort from the institution’s previous experience of appointing and working with particular arbitrators.

  • Further, some disputes involve highly technical issues, can be useful to have at least one member of tribunal who is familiar with the technical issues or applicable law by virtue of his training.

  • [[a disadvantage hard to find arbitrators better qualified than High Court judges, who are provided free]]

• International enforceability of arbitral award (New York Convention 1958).

  • Extensive enforceability of the award.

  • As a result of various conventions (eg New York Conventino), arbitral awards are recognized and enforceable in many more countries than English court judgments.

  • Much easier overseas to enforce than court judgments.

• Flexibility and control over proceedings

  • (1) flexibility re procedure

    • s34, procedural & evidential matters

    • As arbitration is consensual, the parties can choose the most suitable procedure.

    • Not bound by formal rules of court eg written submissions in letter form may be appropriate for a dispute over the interpretation of a written agreement; whereas examination of witnesses may be required for the determination of disputed facts.

    • The parties can be represented by anyone of their choice, as they are not bound by rules limiting appearance to persons with particular legal qualifications (eg not bound by solicitors/barristers having to have advocacy certificates to appear in court).

  • (2) flexibility in time: if dispute needs urgent resolution, parties can choose a tribunal who will act promptly.

  • (2) flexibility in appointment of arbitrator, eg having a specialist arbitrator, eg an engineer.

• Formality

  • Formality is often given to arbitrations by adopting institutional rules, but parties can choose very informal proceedings if they prefer.

  • Proceedings often less formal than in court.

  • By choosing which institution rules to adopt, or choose ad hoc arb the parties can decide between themselves the level of formality and complexity of procedures to be used (CF, in court, procedures laid down by CPR).

• Parties may maintain relationships

• NEUTRALITY AND EQUALITY

  • Where parties come from different countries, arb may be preferable to litigation if neither party is wiling to submit to the jurisdiction of the national court of the other.

  • Arb offers neutrality in choice of law, venue, procedure and tribunal.

  • The parties may agree upon the law and procedure of a third country ,or leave choice to the tribunal.

  • Can appoint an arbitrator from another country or request an international arb institution to make the appointment of 1 or multiple tribunal members.

  • In so doing, parties may be more confident that there will be equality of treatment.

• Finality of award (generally no appeal)

  • Finality can be of great benefit to business people.

  • More difficult to overturn an arbitral award than a court judgment (although CRP has made appeals harder, limited grounds of appeal and permission is required).

• SUMMARY of advantages

  • Flexibility and privacy of proceedings;

  • parties’ ability to choose (directly or indirectly) the tribunal

  • enforceability of the award.

  • Neutrality as regards location, governing law and constitution of the tribunal (very attractive in international commerce, in a world of cross-border transactions and collaborations).

DISADVANTAGES

• It is an open question whether it is cheaper to arbitrate or go to court: depends on nature of dispute and approach of parties.

  • Often is a balance between: ability to save costs on simpler procedures in arbitration compared to court; VS the fees payable to arbitrators and the arb institution.

• Expense and delay (but these are also features of litigation).

  • Extra cost re fees of the arb tribunal; but in many cases the tribunal can more than pay its way by taking control of the proceedings from the outset and conducting them in an efficient manner.

  • NB general duty of tribunal + s1 Arb Act requires an arb tribunal to avoid unnecessary delay or expense.

  • Some delays are peculiar to arbitration: eg, those that can occur at the beginning of the proceedings as a result of the procedures for appointing the tribunal, particularly if challenges are made to the arb agreement or to an arbitrator.

  • However, the limited scope for appeal/recourse against the award may ultimately make the proceedings shorter than similar court litigation (avoiding the possibility of 1+ appeals).

  • Some say that the limited coercive powers of the tribunal make arb vulnerable to delay: this, but once appointed an experienced tribunal will take control of the proceedings and proceed, despite an obstructive party, in order to maintain a reasonable timetable.

• Arbitral decisions are final (no right of appeal as in court)

• Lack of coercive powers/weak powers to impose sanctions re failing to comply with timetables and procedural orders

  • CF judge in court, active case management system

  • So more scope for parties to cause delays in arb

• No summary procedures (eg security for costs, summary judgments)

  • The summary procedures used in English courts are not available in arb.

  • An arb tribunal must give each party a reasonable opportunity of putting his case and dealing with opponent’s case (s33), which does not allow a summary decision in favour of C on ground that respondent has no real prospect of successfully defending its claim.

  • However, an arb tribunal, in appropriate cases, can identify issues for determination in advance of the remainder of the case. Where those issues are determinative of the dispute as a whole, the tribunal is able to ensure that efficiency of the process is maintained.

• NB, tribunal can make peremptory orders in case of party’s default, s41

  • S42 can apply to court to seek order to compel compliance with peremptory order.

  • BUT problem, s42(4): court won’t make an order (re peremptory order) unless satisfied that ‘reasonable time’ gives court discretion, English High Court rarely makes peremptory...