09 Jun — 22

Arbitration - sorry what?

Occasionally we’re asked whether arbitration is a more appropriate means of resolving a dispute than the court process. As is the case with any litigation strategy, the answer depends on what you want to achieve. Today we’ll look at the points to consider. But first, let’s clear up when arbitration is available as an option. You can only choose arbitration if the parties have agreed to it. That usually comes in the form of a clause in the contract, but you may be able to agree to arbitration through correspondence, if you’re sure you want to arbitrate. It’s also important to note that certain courses of action must be taken through the courts, such as getting an injunction. If the option to arbitrate is available to you, here’s a rundown of the issues you need to think about.

Arbitration is private

The arbitration process is ‘behind closed doors’. That means that (pursuant to most arbitration rules) it’s very difficult for anybody else to find out that you are in dispute with another party. And the decision (usually referred to as the ‘award’) is not published.

In court proceedings however, the judge publishes his judgment. That means that anybody can search for, and read the judgment in your case.

In certain circumstances, the public nature of court proceedings might be advantageous for you because it can encourage the other side to settle.

For example, if your claim has the potential to harm the reputation of the company you’re suing, the other side may be keen to avoid the possibility of an unflattering public judgment. By choosing court proceedings over arbitration, you may encourage them to settle before trial.

Or perhaps you’re one of a number of litigants with the same claim against the defendant. Other litigants may be waiting on the outcome of your claim to decide whether or not to bring theirs. If you receive a judgment in your favour, the defendant could be facing multiple additional claims, at extensive cost. In this scenario, you’re giving yourself another powerful card in your hand for settlement discussions when you choose court proceedings over arbitration.

However, if your dispute involves issues that are particularly sensitive, which touch upon trade secrets, then arbitration affords you the privacy you might be looking for.

Flexibility and choice in arbitration

All court proceedings are subject to the Civil Procedure Rules, which are rigidly applied. In arbitration, you can choose from a variety of rules.

Popular choices include London Court of International Arbitration (LCIA), International Chamber of Commerce (ICC) and Chartered Institute of Arbitrators (CIA). There are also specialist arbitration rules for particular industries, such as the Access Dispute Resolution Rules (ADRR) in rail and the London Maritime Arbitrators Association (LMAA) rules for shipping disputes.

These rules allow you the flexibility to agree the procedure and timescales for each step between the parties.

The parties to arbitration also choose their arbitrator(s). In contrast to court proceedings where a judge is allocated to your case, you can choose who you want to preside over your dispute in arbitration. Depending on which rules you opt for, you can usually choose up to three arbitrators to oversee your case (at the same time). They could be experts in your industry, barristers, QCs or a bit of a mixture. In cases that turn on issues that require specialist knowledge of the industry, it can be advantageous to choose experts and lawyers that have worked in your sector before.

Another potential advantage of arbitration is that you can choose a time and a place for the hearing. You’re not tied to court lists and you’re free from the possibility of long delays caused by the lengthy court backlogs.

The right to appeal

One important feature to note is that arbitration awards are final and binding. The scope for appeal is much more limited than in court proceedings. It is possible to appeal to court on a point of law, or if there has been a serious irregularity in the arbitration. In practice, these circumstances are unusual.

If you have a strong case, then the finality of an arbitration award may be particularly appealing to you.

Cost considerations

It’s often suggested that arbitration is a cheaper route than court. But in practice, that’s not usually the case.

Remember that you’ll have to pay your arbitrator, and while these costs are normally split with the other side, the fees are high for this type of specialist work. And if you choose two or three arbitrators, then those costs increase substantially. You’ll also have to pay to hire a room for the arbitration hearing. In court proceedings, you don’t pay for a judge or room hire.

However, the disclosure process can be cheaper in arbitration. You can agree a more limited scope of  disclosure and inspection, which can save costs.

In the round, the costs work out on a similar scale and you shouldn’t choose arbitration simply because you think it will be cheaper (it probably won’t be!)

If you’d like advice on your dispute, including which forum would suit you best, please do get in touch with our experts at HooperHyde Solicitors.


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