A Guide to Arbitration
Businesses faced with a cross-border dispute must make a decision as to which method they will choose to resolve the situation. Going straight to court is no longer the first choice for the majority of organisations. According to the 2021 International Arbitration Survey 90 per cent of the commercial respondents to the survey stated that they elected to use arbitration as their first option to resolve a dispute as opposed to litigation. Whilst there are both pros and cons to litigation and arbitration, the latter offers considerable advantages and flexibility, such as the ability to choose the arbitrator, the language in which the arbitration is conducted and the location where the proceedings should be conducted. Also, the privacy arbitration provides, the discussions and decisions in an arbitration are confidential, as opposed to those in a hearing in open court and finally, the ease of enforcement.
The lawyers in Giambrone & Partners cross-border litigation and dispute resolution teams strongly recommend arbitration as a first step to the resolution of a contentious dispute, depending on the particular issues relating to the dispute.
Arbitration is an Alternative Dispute Resolution (ADR) method that offers a legally binding enforceable solution as an alternative to litigation in a court. There are certain considerations that must be decided at the outset of a transaction. An arbitration agreement is generally incorporated in the terms of a contract relevant to a commercial transaction. The power enshrined in the arbitrator or tribunal (more than one arbitrator) derives from the contractual agreement between the parties. The arbitration agreement should indicate the seat of the arbitration and which procedure rules that are to be followed to govern the arbitration. Most countries will have appropriate law to govern any arbitrations that take place within their jurisdiction but such law does not supersede the procedural rules indicated in the arbitration agreement, previously agreed. The vast majority of countries’ laws relating to arbitration are based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law which aims to close the gaps created by the disparities that exist between the national laws of many jurisdictions, in the hope of creating a universal standard for arbitration which incorporates fairness. The national laws may assist in certain aspects, during the course of an arbitration, in that the parties may apply to a national court to obtain evidence or to obtain a freezing order where appropriate. There may be a degree of variation in the level of support that may be provided often based on the nature of the jurisdiction of the country involved. Therefore, the choice of seat must be carefully considered and enshrined in the arbitration agreement as it strongly influences how an award is enforced.
One crucial factor is that the country in which the chosen seat is located is party to the New York Convention 1958 which is an international treaty providing reciprocal arrangements relating to the enforcement of the awards in 160 countries. It is believed that the most popular choices of seat are London, Paris, Geneva, Hong Kong and Singapore. It should be noted that the reasons allowing an award to be challenged in an arbitration decision are extremely limited.
Arbitrators are appointed neutral decision-makers, either a single arbitrator or as a panel of three, known as a tribunal. In the event of three arbitrators, one will be designated as the “chair” or “presiding arbitrator”. The choice between a single arbitrator and a panel can be made in the arbitration agreement. They are frequently experienced international lawyers and can be selected on the basis of their specialist knowledge related to the dispute. They can be selected through an institution or chosen directly by the parties involved, unlike in a court of law where the parties to the dispute have no involvement in the appointment of a judge.
The decision to rely on institutional arbitration or ad hoc arbitration often hinges on cost. Institutional arbitration, where one of the specialised institutions intercedes and manages the entire procedure. There are over a thousand such institutions globally the most commonly known being:
- the London Court of International Arbitration (LCIA),
- the International Chamber of Commerce (ICC),
- the Dubai International Finance Centre (DIFC)
- the Dubai International Arbitration Centre (DIAC).
A written request must be made to the arbitration centre of choice setting out the matter. The party making such a request will be regarded as the claimant and the other party as the respondent. An Institutional arbitration has the advantage of more formal rules and procedures, as well as a number of arbitrators with well-established track records. One of the disadvantages is the higher costs. Generally, the parties’ legal advisors will present the arguments from both sides to the tribunal.
Ad hoc arbitration is less formal and generally less costly but lacks the administrative support to manage the process. The parties have the option of drafting the arbitral rules themselves. Although generally, the appointed arbitrators themselves manage this aspect; alternatively, the rules written for ad hoc arbitration can be adopted.
The dynamic lawyers in Giambrone & Partners’ litigation and dispute resolution teams have extensive experience in guiding clients through the arbitration process and have enjoyed considerable success in obtaining a positive outcome for our clients.
Giambrone & Partners is present in one of the main world’s arbitration hubs, London. Our litigation and dispute resolution teams’ multilingual capacity allows us to assist clients from other parts of the world.