Arbitration clauses are increasingly finding their way into
commercial contracts. However, the fact that arbitration is a
frequently chosen path nowadays does not necessarily mean that it
is always the best solution. One must know its advantages and
disadvantages and be wary of standard clauses which may be
ill-adapted to one's situation.
Generally, the main advantages and disadvantages of arbitration
clauses which are most often mentioned are the following:
Advantages: (i) simplified procedure; (ii) less documentation to
file; (iii) obtaining a decision is quicker than in the context of
the judicial process; (iv) generally reduced costs compared to the
judicial process; (v) absence of a right to appeal; and (vi) the
confidentiality of the process and the decision, subject to an
application for homologation of the arbitral award or a recourse to
cancel the decision.
Disadvantages : (i) the absence of a right to appeal, with some
exceptions; (ii) the risk of the arbitration clause being
ill-adapted to your particular situation; (iii) costs beyond the
expectations of the parties, particularly when three arbitrators
are appointed, some authors even maintaining that in such a case,
arbitrators' fees are sometimes almost multiplied by four
because of the delays caused by time management and communications
between three arbitrators; (iv) the impossibility to access items
of evidence in the hands of opposing party outside of the judicial
process; and (v) the exclusion of this decision from case law while
the issue in dispute may constitute an important law issue.
Before inserting an arbitration clause in a contract, one must
assess these advantages and disadvantages and, if arbitration is
chosen, the terms of the clause must be adapted, particularly with
respect to following items : (i) things and situations covered
under the clause; (ii) applicable law, making sure to verify
whether such law limits or prohibits arbitration (for example,
section 11.1 of the Consumer Protection Act,1 which
prohibits stipulations whereby the consumer is obliged to refer a
dispute to arbitration or restrict his right to go before a court,
particularly by prohibiting him from bringing a class action or
being a member of a group exercising such a remedy); (iii) the
opportunity to provide for a right to appeal; (iv) the
confidentiality of the arbitration process (subject to an
application for homologation or a recourse for cancelling the
decision); (v) the arbitration process (number of arbitrators,
rules for submitting evidence, etc.); and (vi) the opportunity to
provide for mediation meetings prior to arbitration.
In all cases, the objective sought should be to ensure that in
the event a dispute occurs, your interest will be better served by
arbitration rather than the judicial process. If such is not the
case, avoid inserting an arbitration clause in your contract.
1. C. P-40.1.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).