Introduction About The Cayman Islands

The Cayman Islands are a leading financial centre with an established professional infrastructure. There are approaching 600 licensed banks and trust companies regulated to the standards of the Basle Convention holding over US$500 billion in deposits. Many have an active presence in the Islands while others are licensed and regulated in the Islands to do business in other countries. Other strengths of the jurisdiction lie in capital markets, asset financing, mutual funds, venture capital, captive insurance (which has a population approaching 500), ship registration and fiduciary services.

The Cayman Islands remain a British Overseas Territory with no desire for independence. Their financial prominence is founded on a common law legal system, modern legislation, a stable political and economic environment with no direct taxation or exchange controls and no restrictions on foreign ownership of land. The development of the Cayman Islands has been aided by their proximity to the United States, infrastructure and efficient communications.

The close relationship between the Government and the private sector results in legislation that responds to the changing needs of both the financial community and international regulators. Recent examples are the formation of the Cayman Stock Exchange and the lead taken by the Cayman Islands in adopting "all crimes" anti-money laundering legislation.

The Legal System And The Courts

The substantive law of the Cayman Islands is based on English common law with the addition of local statutes which have in many respects changed and modernised the common law. The Cayman Islands have a good legal system, currently being upgraded to meet the demands of the financial industry.

The court system in the Cayman Islands is based on English law and on the procedural rules of the English High Court prior to the Lord Woolf reforms. Non-indictable criminal and minor civil cases are tried by a Stipendiary Magistrate sitting in the Summary Court. All indictable crimes and most civil cases are tried by the Grand Court which is presided over by the Chief Justice and Grand Court Judges permanently resident in the Cayman Islands. Appeals lie from the Grand Court to the Cayman Islands Court of Appeal, which sits in Grand Cayman, and from there to the Judicial Committee of the Privy Council in England.

A significant proportion of the Grand Court’s workload comprises commercial and regulatory work arising out of the financial services industry. The Grand Court is a Superior Court of Record providing 1hr equivalent jurisdictions of the High Court of England. It offers a timely and efficient forum for the resolution of sophisticated litigation amongst all parties and provides excellent facilities for resolving disputes.

History And The Present Understanding Of ADR

Although historically the Cayman Islands have not been an important centre for the resolution of international commercial disputes by way of alternative means of dispute resolution, the trend is changing rapidly. Cayman arbitration law has evolved considerably in recent years in order to meet the changing needs of the international business community which has led to an increasing use of alternative means of dispute resolution. "ADR" is now understood to include both binding (arbitration) and non-binding methods of dispute resolution, although traditionally there was a more marked distinction in the definition separating arbitration from non-binding means of dispute resolution. For the purposes of this article, all means of dispute resolution other than litigation are being grouped under the "ADR" definition. The principal of these include mediation, conciliation, expert determination and arbitration. Arbitration is the most popular because it is a means of securing a binding decision enforceable in the courts against the losing party. The other means are instead devices for reaching a consensual settlement between the parties in dispute which is unenforceable, per se, in the courts. The most widely used means of ADR in the Cayman Islands are considered in order of importance below.


The evolution of arbitration in the Cayman Islands has not been totally as a result of dissatisfaction with litigation. In fact, litigation in the Cayman Islands can be an efficient and effective method of resolving disputes that are not appropriate for resolution by ADR. Resolving a dispute by means of litigation before the Cayman courts can be a relatively cheap and swift process. Depending on the nature and complexity of the dispute in question, it can take less than a year for a newly filed action to get to trial. There is very little backlog of cases (compared to other major jurisdictions) and the Cayman judiciary is highly qualified, experienced and competent to deal with the most complex technical and commercial disputes.

Nevertheless, the principal benefits of arbitration, such as, for example, confidentiality, the limited discovery requirements and the fact that the relatively amicable nature of arbitration enables parties to take part in proceedings whilst continuing to engage in business relations, are making arbitration more popular with the Cayman business community. Arbitration clauses, sometimes prefaced with clauses providing for other non-binding means of dispute resolution to be tried before commencing arbitration proceedings, are being included regularly in both domestic and international commercial contracts governed by Cayman law. However, for the purposes of the present article, the focus is being placed on the use of arbitration as a means of resolving international commercial disputes.

Most parties choosing arbitration in the Cayman Islands for the resolution of international commercial disputes will expressly provide in their agreements for the arbitration to be governed by the rules of a particular organisation or arbitral body. Such rules may be trade specific or general. They may be the arbitration rules of an international institution such as the American Arbitration Association ("AAA"), the International Chamber of Commerce ("ICC") or the London Chamber of International Arbitration ("LCIA"). Arbitration under the rules of certain of the international institutions may take place in the Cayman Islands either by agreement of the parties or, in its absence, by direction of the relevant institutions. Alternatively, the parties may devise their own rules or adopt the ad hoc rules of an organisation such as the United Nations Commission on International Trade Law ("UNCITRAL"). Whatever formal rules or procedures are adopted, the choice of the Cayman Islands as the seat of the arbitration will facilitate the arbitration process due to the unique combination of features it provides, which includes its favourable legislation, the high calibre and expertise of its judiciary and its commercial and business population and efficient systems of communication.

Legal Framework

The evolutionary history of the Cayman arbitration system is based on a piecemeal collection of statutory rules and common law principles based on English law.

There are two principal statutes that govern private domestic and international commercial arbitration in the Cayman Islands. These are:

    1. The Arbitration Law (1996 Revision) (the "Arbitration Law") (which was originally enacted as Law 2 of 1974 on 18th March 1974. This is the basic code for arbitrations in the Cayman Islands; and
    2. The Foreign Arbitral Awards Enforcement Law (1997 Revision) (the "FAAEL") which was originally enacted as Law 30 of 1975 on 11th December 1975. This gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.

Underlying Cayman arbitration law is a strong presumption in favour of allowing the parties to a dispute to resolve their dispute in accordance with the private system agreed between them, rather than one imposed by the courts. Pursuant to the FAAEL, the Cayman court has the mandatory power to order a permanent stay of any court proceedings commenced in breach of an arbitration agreement. Consequently, in recent years, the Cayman court has rendered a number of pro-arbitration decisions noting that in circumstances in which the parties have agreed to submit a dispute to arbitration and that dispute falls within the provisions of a valid and binding agreement to arbitrate, the court will give effect to the agreement to arbitrate. As a result, a party attempting to litigate in Cayman in breach of an arbitration clause contained in an international arbitration agreement will inevitably be met with an application by the other party for a permanent stay of court proceedings.

The function of the court

Pursuant to the Arbitration Law, the Cayman court has supervisory jurisdiction, inter alia, to appoint an arbitrator where the parties’ agreed mechanism has failed; to extend the time for commencement of proceedings; to assist the arbitrator to compel compliance with procedures, such as the obtaining of evidence; to make interim protective orders in aid of the arbitration; and to rule on preliminary points of law. In addition, the Cayman court has adopted a supervisory role to safeguard quality and fairness. In pursuit of this, it may revoke the authority of the arbitrator, eg. for misconduct or delay, or it may set aside or remit the award (prior to its enforcement) for fraud or bias; improper procurement of the award; if the dispute falls outside the scope of the arbitration agreement or if the arbitration agreement is void or unenforceable; if there are patent defects in the award; a mistake admitted by the arbitrator; or substantial fresh evidence comes to light.

In addition, the Court has a supportive role. In the case of some disputes, the availability of urgent interim relief is a critical element in the effectiveness of the final remedy. The Cayman court may provide interim relief in support of the arbitral process, including:

  1. Orders supporting interlocutory steps in the arbitration such as orders compelling witnesses to attend a hearing. Most arbitral rules provide the arbitrator with wide powers to order the production of evidence and to obtain other information from the parties. If not, such powers are granted to the arbitrator by the Arbitration Law. However, the Arbitration Law does not grant to the arbitrator coercive powers to assist the parties to gather important evidence in the custody or control of non-parties to the arbitration.

  1. Orders to maintain the status quo pending an award and/or to ensure that the ultimate award is effective, for example, the granting of an interlocutory injunction or an order for the preservation of assets which are the subject matter of the reference and which may be in the custody or control of third parties who are not parties to the arbitration. In certain cases, the Cayman court also has the power to make urgent orders to maintain the status quo in aid of foreign arbitrations.

  1. Orders for security for costs (although the court’s power is exercised sparingly and in circumstances where it does not interfere with the arbitrator’s powers over the arbitral process).

The Cayman court will seek to be supportive but sparing in the exercise of its powers in an endeavour to strike a balance between the need to do justice and its determination not to encroach upon the powers given to the arbitrator by the parties. The court’s jurisdiction to make interim relief orders does not prejudice any powers that may be vested in the arbitrators to make any such orders. Instead, it is exercised in circumstances where one of the parties needs urgent action. On the application of one of the parties, it may be exercised even before the appointment of the tribunal is complete, and it is more commonly exercised when one of the parties may require an order to be made that will only be effective if it is binding on non-parties to the arbitration. In such cases, court intervention may be essential whatever remedies are available under the arbitration agreement.

Advantages of arbitration over litigation

Not all cases are appropriate for arbitration or other means of ADR. Based on the circumstances of each individual cases there may be advantages in resolving certain disputes by means of arbitration or other ADR procedures rather than by litigation. In appropriate cases, the principal advantages of arbitration over litigation are a simpler procedure, possibly cost-savings and, most importantly, privacy and confidentiality of the proceedings.

Generally, there can be a reduced element of congestion in arbitrations compared to court proceedings as the parties can agree their own timetable and bring the resolution of their dispute to a swifter conclusion. A further advantage of arbitration (which results in costs and time savings) is the fact that discovery is limited to documents which are strictly relevant to the issues in dispute between the parties and upon which the parties intend to rely (although, subject to the agreement to arbitrate, the arbitrator does have the power to make specific orders relating to discovery). Moreover, subject to the agreement to arbitrate, arbitral awards are not subject to judicial review except to a very limited degree; and (except if the arbitration is regulated by the LCIA rules) the award and proceedings remain private, unless either party seeks judicial enforcement or review of the award which may bring the proceedings in the public domain by reference and/or determination of the proceedings in open court.

Further advantages of institutional arbitrations (such as under the rules of the AAA or the ICC) compared to ad hoc arbitrations are a guaranteed result; virtually the same flexibility as ad hoc arbitration; speed; well-established and tested procedures as a safety net; supervision and quality control; an internationally accepted reputation; neutrality and independence; world-wide coverage; administrative facilities and an extensive panel of experienced and specialised arbitrators world-wide.

Institutional arbitrations are particularly advisable in the context of Cayman arbitration because of the relatively limited availability of locally based independent and technically experienced arbitrators. Conducting an arbitration in Cayman under the rules of the AAA or the ICC would allow the parties to take advantage both of the benefits afforded by relevant Cayman legislation and of the infrastructures of the institution chosen, in particular, the expertise of its panel of arbitrators.

The Arbitration Agreement

There are no formal requirements for an arbitration agreement under Cayman law. Generally, it is advisable for an agreement to be in writing and for it to be clear on the face of the agreement that the parties intend their disputes to be referred for final decision to arbitration before a fair and impartial tribunal and for it to expressly provide that judgement on the award rendered by the arbitrator may be entered in any court having jurisdiction.

There are no formal restrictions on the types of disputes that can be referred to arbitration and an agreement to arbitrate can be made before or after a dispute has arisen. However, arbitration (or, for that matter, other means of ADR) will not be appropriate in every case. If there are important or undecided points of law to be considered, if the case is a test case or one of public interest and/or if an injunction (as opposed to a monetary award) is being sought, litigation may be more appropriate. But, in all cases, it is important that the parties at least consider with their legal counsel all the available options for settling disputes and make appropriate provisions for the most appropriate of these in their contracts.

In contracts regulating particularly complex commercial relationships, it is increasingly common for a reference to arbitration to be the second, or sometimes third tier of dispute resolution that becomes operative when the previous tiers have failed to produce a satisfactory result. The clauses reflecting such mechanisms have become known as "escalation" clauses, by which is meant a provision that no formal steps are to be taken in a dispute by either party until after a meeting between the parties’ respective chief executives. This may be followed by a provision for mediation, and only after that fails to produce a satisfactory result can the dispute proceed to litigation or arbitration. The reasons underlying the growing popularity of such clauses are based on the parties’ desire to find mechanisms to discourage disputes altogether, or, if disputes do arise, to ensure that they can be contained in the interests of good management and to preserve the business relationship between the parties.

In drafting an arbitration agreement the degree of specific provisions required to regulate the arbitral procedures will depend largely on whether or not the parties have elected to have an ad hoc arbitration or an arbitration under the rules of a body such as the AAA or the ICC. If specific institutional rules are incorporated into the agreement to arbitrate then it is usually recommended that the parties simply make specific provision for a number of additional matters that are not dealt with in the institutional rules:

    1. the governing law of the arbitration agreement (which may or may not be the same as the governing law of the main body of the contract);
    2. the place or seat of arbitration;
    3. the number and qualification of arbitrators;
    4. the powers of the arbitrators, particularly with reference to types of relief available (eg. power to render an interim award);
    5. the confidential nature of the proceedings; and
    6. the language of the arbitration where the parties are of different nationalities.

Unless the parties have agreed otherwise, their choice of the place or seat of the arbitration will usually imply the choice of the law governing the arbitration.

Appointment of the arbitral tribunal

Under Cayman law the parties are free to choose for themselves the composition of the tribunal. There is a statutory presumption that, in the absence of an express provision to the contrary, the parties intended to refer the dispute to a sole arbitrator.

No special formalities are required for the appointment of the tribunal unless the agreement provides otherwise. It is advisable for the agreement to provide for contingencies such as the parties failing to agree on the selection of an arbitrator. Generally, if the parties have elected to have the arbitration administered under the rules of a particular body, the rules will enable that body to appoint one or more arbitrators as appropriate. If the parties have not provided for, or cannot agree on, an effective method of appointment of arbitrators, then the Cayman court has the power to make the appointment itself. This is consistent with the Cayman court’s supervisory function of ensuring that the parties’ chosen method of dispute resolution can be effectively implemented.

If the agreement to arbitrate provides for the appointment of three arbitrators, one chosen by each of the parties and the third by the two party appointed arbitrators, under Cayman law, the agreement shall have effect as if it provided for the appointment of an umpire, and not for the appointment of a third arbitrator, by the two arbitrators appointed by the parties. However, where the agreement to arbitrate provides that the reference shall be to three arbitrators to be appointed otherwise than one by each of the parties and the other by the two appointed by the parties, the award of any two of the arbitrators shall be binding.

The choice of the arbitrators is an important tactical step in the proceedings. In the case of complex technical disputes, it would be an advantage if some of the arbitrators were experts in the subject-matter of the dispute; alternatively, retired judges or distinguished attorneys would be more appropriate if there were complex legal issues involved.

A difference between the US and the Cayman system should be emphasised. That is that parties to US arbitrations may agree to the appointment of non-neutral partisan arbitrators who are not held to the same standards of disinterest as neutral arbitrators. That is not the case either under Cayman law or under the rules of most of the major institutional arbitral bodies. Arbitrators are required to be neutral and independent, notwithstanding the fact that they are appointed by a particular party. If an arbitrator is found to be not impartial, the relevant arbitral institution may review the choice of arbitrators to ensure independence and impartiality and the Cayman court will, on the application of one of the parties to the arbitration agreement, set aside the appointment of that arbitrator.

Powers and jurisdiction of the arbitrators

Once validly appointed, the arbitral tribunal has jurisdiction to make and publish a binding award on those matters referred to it by the parties for determination. The powers and jurisdiction of the arbitrators will be found in the first place in the arbitration agreement. In addition, the Arbitration Law confers on arbitrators further powers, such as, for example, to compel the parties to attend a hearing and to provide the arbitrators with whatever evidence they deem necessary for the resolution of the dispute.

Where a party fails to comply with the arbitrators’ directions, they may make an award in default or draw adverse findings from that party’s failure to do so, provided that the defaulting party is given a reasonable opportunity to participate in the process. The resulting award may then be enforced against the defaulting party by way of an action on the award in the Cayman court. The claimant is therefore assured of a result, even where the other party does not co-operate in the proceedings.

The arbitrator is empowered under Cayman law to come to a view on the merits of the dispute in accordance with the law which governs the dispute. However, it is generally considered that a Cayman arbitral tribunal may not decide the dispute in accordance with equity and good conscience. There is some doubt, therefore, as to whether or not a provision in an agreement that the arbitrator is to decide ex aequo et bono or as amiable compositeur will be effective in a Cayman arbitration.

The Award

For an award to be binding under Cayman law, the arbitrator must decide only those issues that have been referred to him and must not grant relief outside his powers. The arbitrator may only make orders that are capable of arising from the consensual authority of the parties. Therefore, they cannot order imprisonment or make orders affecting non-parties. They can, however, subject to the arbitration agreement, order specific performance of any contract other than a contract relating to land or an interest in land and may award simple interest at their discretion.


Cayman law does not permit an appeal from any arbitral tribunal on the merits. Appeals against the awards of arbitrators on questions of law can only be entertained by the Cayman court with the leave of the court. The requirement for leave has allowed the Cayman court to enforce a policy of discouraging appeals, except in clear cases where an issue of general importance to the public interest is involved. Under Cayman law, it is possible for parties to an international arbitration to agree to waive their rights to an appeal on questions of law. This may be achieved by incorporating into the arbitration agreement the rules of either the ICC or the LCIA which contain such provision or to include specific wording to that effect in ad hoc arbitration clauses. However, for maritime, insurance and commodities contracts disputes, such provisions must be expressly incorporated into the agreement, either before or after the dispute has arisen.

Recognition and Enforcement of Foreign Arbitral Awards

The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is given effect in the Cayman Islands by the FAAEL. Foreign awards may therefore be enforced under the procedures in the FAAEL. This requires bringing a Court action in the Cayman court (an action on the award).

A party seeking to enforce a New York Convention award in The Cayman Islands must produce:

    1. The authenticated original award or a certified copy of it;
    2. The original arbitration agreement or a certified copy of it; and
    3. Where the award or agreement is in a foreign language, a certified translation.

A New York Convention award will not be enforced if the person against whom it is invoked proves one of the following:

    1. That a party to the arbitration agreement was (under the law applicable to him) under some incapacity;
    2. That the arbitration agreement was not valid under the law to which the parties subjected it under the law of the country where the award was made;
    3. That a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case;
    4. That the award deals with a dispute not contemplated by or not failing within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration;
    5. That the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, or failing such agreement, with the law of the country where the arbitration took place; or
    6. That the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.

Enforcement may also be refused if the award is in respect of a matter which is not capable of resolution by arbitration or if it would be contrary to Cayman public policy to enforce the award.

Methods Of Non-Binding ADR


Mediation is a technique which makes use of an independent third party neutral, generally referred to as a mediator, to manage the process of resolving a dispute. The mediator is appointed by the parties to hear their dispute. The mediation itself may consist of a combination of joint and single sessions before the mediator. Initially each disputant has the opportunity to make submissions to the mediator in the presence of the other party (in some cases, written submissions are made). Thereafter, the parties usually withdraw to separate rooms while the mediator discusses the dispute with each in turn. The mediator’s job is to seek to identify the common interests of the parties in order to find a solution satisfactory to both parties. He is not required to focus on the legal merits of the respective parties’ case. Through his discussions with the parties, the mediator is given access to confidential information about the dispute not available to the other side which enables him to make a more impartial assessment of the dispute and to direct the parties towards settlement. As a result of this process, which is sometimes described as mediator-led negotiation, the parties are persuaded towards a reciprocally satisfactory solution that may not have emerged in the course of ordinary negotiations between them.

The typical stages in a mediation may commence with the presentation of a brief written summary of the case to the mediator in advance of any meeting followed by an initial joint meeting for brief oral submissions. Subsequently, private meetings usually take place between the mediator and the parties in turn. The mediator normally shuttles back and forth between the parties to clarify issues and seek settlement possibilities. There are then further joint meetings between both parties and the mediator, whether for the parties to continue negotiations directly, for an agreement to be finalised and concluded or to end the mediation.

Mediation may occasionally be conducted without joint meetings.

The mediator plays a variety of roles. He acts as facilitator, assisting in communications; as deal-maker to help the parties to find overlap in their bargaining positions or to encourage compromise on concessions; as problem-solver to assist the parties in identifying creative options; and/or as adjudicator-assessor, to provide the parties with a common sense or legal/technical appraisal of the merits of their case.

If the parties agree (before or during the mediation), a mediator may issue a written report recommending terms of settlement or giving an opinion of the case.

Other methods of non-binding ADR

The other methods of non-binding alternative dispute resolution, as opposed to arbitration, though differing in procedure, revolve around the same principle as mediation: a neutral third party is given access to information about how each side sees their case, and uses it to suggest a solution which each party must agree to if the dispute resolution is to succeed.

These are the following:

    1. The Executive Tribunal (also called the "mini trial") is a more formal type of mediation hearing. Its major feature is to allow senior executives to assess the case between their companies. A formal presentation is made by company representatives to a panel consisting of the neutral chairman and a senior executive from each party (usually someone with no previous direct involvement in the dispute). After hearing the presentations and a period of questioning, the executives attempt in private to negotiate a settlement with the assistance of the third party.
    2. Expert Appraisal offers the parties (either jointly or individually) a technical expert’s assessment of their case to assist negotiations.
    3. Adjudication, in which a neutral third party gives a non-binding finding on the case or an aspect of the case (e.g. technical merits).

The assessments and findings referred in (2) and (3) above can then be used as the basis for further negotiations between the parties. Alternatively, the parties may agree to treat them as a temporarily binding decision until a certain time has passed (e.g. completion of contract performance) when parties are free to seek a legal or arbitral award (a legally binding adjudication) to revoke the earlier decision.

Unlike arbitration, neither the mediator nor any other neutral third party can produce a resolution of the dispute that is binding on the parties. Therefore, one of the preconditions for a successful resolution of the dispute using mediation or one of the other means of non-binding ADR is that there must be agreement between the parties as to the use of mediation as well as considerable common ground between the parties. If one side is unwilling to settle for anything less than its initial demands, refusing to compromise, the dispute has no hope of resolution other than as a result of arbitration or litigation.

In most cases, where there is agreement to try alternative dispute resolution, it is likely that both parties are willing to have a negotiated settlement, and will compromise on their desired positions. If a mediation or other form of non-binding ADR is successful, the compromise between the parties is usually drawn up in writing, signed by the parties and witnessed by the mediator or other neutral third party. If the "losing" party later decides to renege on the agreement, the other party’s remedy is to sue him in the courts for breach of the settlement agreement. However, if the mediation or other ADR procedure is unsuccessful, the parties have no alternative to an arbitration or litigation.

The costs involved in preparing for the mediation or mini trial can be considerable, particularly in complicated cases where it may take some weeks for the parties to prepare their position in order to present it to the third party. To ensure that these are not wasted with no result, and to promote mediation, certain of the major institutional arbitral bodies now encourage the parties to try mediation shortly after filing a request for arbitration as part of the resolution process, as an attempt to bring about an earlier resolution of their dispute. The attraction of this is that it can be tried in tandem with the arbitration, without unnecessary delays and relatively cheaply.

Expert Determination

Expert determination has been a feature of English commercial and legal practice for at least 250 years and it is growing in popularity in the Cayman Islands also. It is a simple procedure which originally enabled technical and valuation issues to be referred to a suitably qualified person or persons to determine "as an expert and not as an arbitrator". It is found in a wide variety of commercial contracts, particularly in technical contexts, such as construction.

The system is quick, cheap and private. It is closely related to arbitration with certain fundamental differences. One of these is the fact that there is no statutory mechanism for review of the award/determination as there is for arbitration under the Arbitration Law. In addition, there is no obligation on the tribunal to keep to the international standard of "due process" laid down by the New York Convention. Another key difference lies in the extent to which the expert can take, and keep, the initiative. Subject to the parties’ agreement, the expert is free to make his own investigations into the dispute without discussing those investigations with the parties and may proceed to a decision based on them without the parties even being aware that he has carried them out. Whereas, although an arbitrator can take the initiative, he must refer back to the parties.

Expert determination offers a system which produces a binding result without the formality of litigation and of most arbitration. This is why it appeals to those drafting multi-tiered dispute (or escalation) clauses whose purpose is to discharge and contain disputes. Those who start a dispute are faced with the prospect of its immediate, or at least relatively swift, resolution, as opposed to the initially cheaper and less committed posture of threatening an arbitration for litigation.

Expert determination is usually both a final and binding system in that experts’ decisions cannot generally be challenged unless it can be shown that the expert is misinterpreting his task, or on the ground of fraud, partiality and "mistake".

Unless otherwise agreed, the expert is liable in negligence to the parties and has no immunity. Consequently, before accepting an appointment, the expert will always ask for immunity and possibly even an indemnity.

Making Use Of ADR

We have seen above what are the principal differences between litigation and arbitration and the circumstances in which one may be more appropriate than the other in resolving a dispute. Below, we deal with non-binding means of ADR and the circumstances in which one or more of these may be appropriate to try before resorting to litigation or arbitration.

When to use non-binding ADR

It is generally accepted that a case is appropriate for ADR in circumstances where:-

  1. The parties want to resolve a dispute or to find a solution to a negotiating problem whilst preserving a business relationship or reputation and minimising the costs, risks and stress of litigation or arbitration;
  2. ADR is also appropriate in circumstances where the dispute is too complex to resolve satisfactorily in straight negotiations or by adjudication, (for example, because there are too many parties involved, or delicate issues to be considered, difficult technical questions to be determined or evidential uncertainties); or
  3. Where the parties would like an independent and confidential appraisal of the merits of their case at an earlier stage than in the courtroom or before an arbitral tribunal in order to preserve their business relationship and avoid spending considerable sums of money in disputes.

Appropriate method of ADR

The advantages of ADR mean that the parties should give it adequate consideration before resorting to litigation or arbitration in most cases. However, it is not always appropriate. For example ADR will not be effective in any cases where one side to the dispute has no genuine interest in settlement, or where there are important legal issues at stake, or if one of the parties requires a legal precedent out of their case, or needs an injunction quickly to preserve its rights and/or its property.

How and where to use it

The best time to use ADR in a dispute is to be determined by the parties based on all the circumstances of the dispute. Both sides must have reached a point where they have a genuine interest in seeing an end to the dispute or to ineffective negotiations whilst preserving their business relationship and avoiding what may turn out to be considerably expensive alternatives.

The prospects for the future of ADR appear promising because whilst ADR can benefit the parties in terms of costs, timesaving and preservation of business relations, it does not present any major disadvantages in that, if ADR fails, the parties’ respective positions are preserved and the parties can institute legal proceedings or commence arbitration proceedings to resolve their dispute at any time.


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.