When dealing with other businesses, it is not uncommon for issues or disagreements to arise. To prepare for such situations, your business may wish to adopt a dispute resolution procedure. Arbitration is a popular dispute resolution process for commercial bodies. This article will outline:

  • what arbitration is;
  • what an arbitration agreement is and why your business should have one; and
  • the typical process.

What is Arbitration?

Arbitration is an alternative dispute resolution method. Here, the disputing parties agree to refer their conflict to an independent third party who will provide a final, binding resolution. This third party is known as the arbitral tribunal. An arbitral tribunal can be an individual arbitrator or a panel of arbitrators. The arbitral tribunal makes a binding and enforceable decision by the arbitration agreement that the parties entered into. The disputing parties contractually agree to accept the outcome, regardless of whether they consider it to be right.

As a third party decides the outcome of the conflict, there are procedural similarities between arbitration and litigation, or going to court. These include that both procedures:

  • involve legal representatives arguing on behalf of the disputing parties;
  • can call witnesses and have them examined; and
  • employ the use of documentary evidence

However, arbitration offers far more flexibility than litigation:

  • you can choose the procedural rules that you wish to adopt. Your ability to choose your own procedure also makes the process less formal than litigation;
  • you can elect your own arbitrator who has expertise in the matter that is in dispute. In contrast, you do not get to choose the judge that determines the outcome of your court case; and
  • the process tends to be more time and cost-effective than going to the High Court to settle your dispute.

As arbitration is a flexible dispute resolution method, it can settle nearly all conflicts. The key requirement is that the conflicting parties have agreed to submit their dispute to arbitration. However, you cannot use this process if your:

  • conflict involves criminal offences; or 
  • arbitration agreement is contrary to public policy.

What is an Arbitration Agreement?

An arbitration agreement is a contract that you enter into to submit your dispute to an arbitral tribunal. This agreement can be oral or a written document. You can enter into this agreement when your dispute arises, or in advance. An agreement to arbitrate a future conflict can be conveyed as a submission or an arbitration clause. This clause will be included in any contract your business enters into that creates a legal relationship with another business or party. By including an arbitration provision in your contracts, you are ensuring that your future disputes can be resolved in a manner that:

  • you and the other party have agreed to;
  • will assist in preserving your legal relationship; and
  • is more time and cost-effective than litigation. 

The Arbitration Process

The arbitration process commences when you:

  • or the other disputing party, request for your dispute to be referred to the arbitration procedure detailed in the arbitration clause of your contract; or
  • and the disputing party enter into an arbitration agreement to refer your dispute to an arbitral tribunal.

You may also wish to enter into another agreement to appoint the arbitral tribunal who will resolve your dispute.

Before the Hearing

Once you have appointed an arbitral tribunal, it is common practice to call a preliminary meeting. All of the disputing parties and their legal representatives or advisers should attend this meeting, either in person or over the phone. This meeting should:

  • set a timeline of the proceedings, including a date for your hearing; 
  • confirm the key issues in dispute;
  • clarify how you want these issues resolved. This clarification should involve specifying the rules and procedure that you wish for the arbitral tribunal to follow; and
  • finalise the costs of the arbitration.

Shortly after the preliminary hearing, or in an agreed period, you (as the claimant) will usually submit a statement of claim to the other disputing party and the arbitral tribunal. This statement of claim must contain:

  • the key issues of the dispute;
  • your side of the dispute;
  • the relevant law;
  • any facts that support your claim; and
  • the relief that you seek from the dispute.

You should submit all relevant documents alongside this statement of claim. 

Once you have submitted your statement of claim and the other party has responded, you will usually go through the process of discovery. Discovery is a procedure where you and the other party are required to provide one another with a list of the documents relevant to your dispute. You each have the opportunity to inspect these documents to assist in your case. 

The Hearing

The procedure for your hearing is determined by your arbitration agreement. Regardless of the procedure you choose, your hearing should be:

  • fair; 
  • impartial; and
  • conducted by an arbitrator who complies with the rules of natural justice.

As the claimant, you will usually begin the hearing. You will:

  • present your opening submissions;
  • call on any witnesses to support your case; and
  • allow the other party to cross-examine your witnesses.

Throughout this process, you should aim to convey your case in a manner that will convince the arbitral tribunal to decide in your favour.

The respondent will go through the same procedure. Throughout both presentations, the arbitrator may ask the witnesses questions to assist in their final decision. 

The Award

Once the hearing has concluded, the arbitrator will consult all of the arguments and evidence presented. The arbitral tribunal will issue their final decision, or the award, in the period prescribed in the arbitration agreement or as soon as reasonably possible. This award must:

  • be in writing;
  • be signed by the arbitrator; 
  • clearly state the outcome of the dispute;
  • articulate the reasons for this outcome, including the law used; and 
  • deal with all of the questions raised in the arbitration. 

Key Takeaways

Disagreements are a natural part of commercial relationships. However, it is important to deal with these issues quickly and effectively to ensure that your relationship can continue. To assist in resolving future disputes, you may wish to include an arbitration clause in your contracts with other businesses. Through arbitration, your disputes can be resolved by a neutral third party through a procedure that you have agreed to. If you are interested in using arbitration to settle a dispute, contact LegalVision’s disputes lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

What is arbitration?

Arbitration is an alternative dispute resolution process in which disputing parties agree to refer their conflict to an independent third party, the arbitrator, who will provide a final, binding resolution.

What is an advantage of arbitration?

It offers far more flexibility than litigation when it comes to the procedure through which a dispute is settled. 

What is the arbitration agreement?

An arbitration agreement is the contract that you enter into to submit your dispute to an arbitral tribunal.

What is an arbitration award?  

The award refers to the final decision issued by the tribunal. 

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