Overall, this article is intended to clarify dispute resolution through arbitration process. Generally speaking, arbitration as dispute settlement has been at the center of the work of international arbitration lawyers and practitioners.
What are the basic types of Dispute Resolution?
It is widely accepted that there are four basic forms of conflict resolution:
- negotiation: negotiation represents the least formal form of dispute resolution. Parties come together and solve the concerned dispute on their own.
- mediation: a neutral third party assumes responsibility to help disputants to reach a consensus on their own.
For a useful observation about the mechanism of the United Nations Convention on International Settlement Agreements Resulting from Mediation, our article on A Brief Analysis of the Singapore Convention is available online here.
- arbitration: individuals or companies are free to choose the best dispute settlement process, outlined above. It is also critical to recognize that arbitration and mediation play a significant role in the development of international trade.
- litigation: judicial authorities have a central role in finalizing the conflict complained of.
What are common forms of Alternative Dispute Resolution
Arbitration, together with negotiation and mediation is regarded as alternative dispute resolution. More specifically, alternative dispute resolution refers to an action or a procedure intended to resolve a conflict between parties without lodging a case before a court.
What is Arbitration?
The word "arbitration" refers to a procedure in which a dispute is submitted, by agreement of the parties, to the arbitrator(s) making a binding decision on the dispute. Parties bring their conflicts before a third party as a neutral arbitrator or neutral arbitrators, rather than the judicial authorities.
What are the fundamental features of arbitration procedures?
In a nutshell, there are four necessary elements for arbitration:
- arbitration depends on consensus of parties,
- the parties of conflict concerned select and appoint the arbitrator(s),
- arbitration requires confidential procedures,
- the decision of the arbitrator (s) must be recognized as final.
What are the main types of arbitration?
There are two forms of arbitration.
Firstly, ad hoc arbitration refers to a procedure accepted by the parties in advance.
Secondly, international arbitration mechanisms require a dispute settlement under the auspices of one of the arbitral organizations including International Chamber of Commerce, International Centre for Dispute Resolution.
What are the advantages of arbitration?
It is critical to address several advantages of arbitration in settling the disputes. As outlined above, arbitration is a process through which parties resolve disputes without having to go to court. Therefore it is faster than litigation. Besides, arbitration is beneficial to both parties because they can settle the dispute without having to incur the expense of a lawsuit. More explicitly, arbitration means an escape from litigation costs, saving time and energy. The main reason is that arbitration provides a conflict resolution with reduced attorney fees and without judicial proceedings. To sum up, arbitration provides the settlement of a conflict in a simplified procedure, in a shortened time frame, and in a cost- and time-effective manner.
Are there any disadvantages of arbitration?
There are of course a number of weaknesses of arbitration. The below-mentioned shortcomings of arbitration arise from the fact that a single arbitrator has a full capacity of managing, judging and giving a final decision on the relevant dispute. Therefore, it poses serious risks including,
- lack of transparency,
- lack of impartiality,
- lack of independence,
- lack of possibility to have another chance such as negotiation upon mutual consent.
What are the challenges faced by arbitrators?
Justifiable doubts and baseless rumors or allegations may pose serious concerns to the arbitrator's impartiality and independence. The arbitrator may be challenged where justifiable doubts as to the arbitrator's impartiality or independence exist. Thus, taking into account the fragility of their responsibilities, arbitrators should take very careful steps in carrying out their duties. In this context, leading international instruments formulates proceedings of challenge of arbitrators including the UNCITRAL Arbitration Rules of 1976 articulating the settlement of a broad range of disputes between private commercial parties where no arbitral institution is involved, investor-State disputes, State-to-State disputes and commercial disputes.
Overall, this paper mainly examines all pros and cons of using arbitration. In the final analysis, it is worth reiterating that arbitration is a faster, more simple, more peaceful and less expensive option than a lawsuit. Nevertheless, we cannot overestimate potential and existing disadvantages of arbitration. A balance cannot be stricken between pros and cons of arbitration without an in depth consultation. Commercial dispute settlements through arbitration require the provision of a comprehensive legal guidance.
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.