What is arbitration and why choose it?

Arbitration is a form of alternative dispute resolution often preferred to litigation due to it potentially being more cost-effective, more flexible, and quicker than going to court.

In the United Kingdom, arbitration is governed by the Arbitration Act 1996 and the associated rules of the arbitral institution that the parties have chosen to administer the arbitration.

How arbitration works

Both parties to the dispute must agree to resolve their dispute through arbitration, either through an arbitration clause in a contract or through a separate agreement to arbitrate.

The parties choose a neutral arbitrator, which can either be a single arbitrator or a panel of arbitrators to hear the case. If they fail to disagree on an arbitrator, they can ask an arbitral institution to appoint an arbitrator or panel for them.

The parties must exchange information and documents relevant to the dispute and may conduct discovery (the process of gathering evidence and information) in accordance with the rules of the arbitral institution or any rules agreed upon by the parties.

During the arbitration hearing, the parties will present their cases to the arbitrator, who then considers the evidence and arguments. The hearing may be conducted in person, by video conference, or by other means agreed upon by the parties. After considering the evidence and arguments, the arbitrator renders a decision, called an award, which is final and binding on the parties.

Benefits of arbitration

Arbitration is growing in popularity, especially in international disputes as parties may be reluctant to choose a national court for litigation due to concerns around a fair trial and prejudice. This form of dispute resolution is often considered more favourable due to the following:

• Speed: arbitration proceedings are typically faster than going to court as they are not subject to the same delays and scheduling constraints. This can be especially helpful if the parties need to resolve the dispute quickly to move forward with their business or personal lives.
• Cost: arbitration is typically less expensive than going to court, as it involves fewer legal procedures and does not require the parties to pay court fees.
• Confidentiality: arbitration proceedings are generally more confidential than court proceedings, as they are not open to the public and the parties can agree to keep the outcome of the arbitration confidential.
• Flexibility: arbitration can be tailored to the specific needs of the parties, and the parties can agree on the procedures and rules that will apply to the arbitration. This can allow for a more efficient and effective resolution of the dispute.
• Expertise: the arbitrator(s) appointed to hear the case will often have expertise in the subject matter of the dispute, which can be particularly helpful if the dispute involves technical or specialised issues.

Disadvantages of arbitration

However, there are also several disadvantages to arbitration that parties should consider before choosing this option:

• Limited remedies: the remedies available through dispute resolution may be more limited than those available through the courts. For example, a party may not be able to recover damages for pain and suffering or punitive damages in arbitration.
• Limited ability to appeal: in many cases, the decisions made in dispute resolution proceedings are final and not subject to appeal. This means that parties may not have the opportunity to have the decision reviewed by a higher court if they believe that an error was made.
• Limited discovery: in some dispute resolution proceedings, the parties may not have the same opportunity to conduct discovery (the process of gathering evidence and information) as they would in court. This can make it more difficult for a party to build a strong case or challenge the other party’s evidence.
• Potential enforcement difficulties: in some cases, parties may have difficulty enforcing the decision reached through dispute resolution, particularly if the other party is unwilling to comply. This may require the party seeking to enforce the decision to go to court to obtain an enforceable judgment.
• Time and cost: while alternative dispute resolution (e.g. arbitration or mediation) can often be faster and less expensive than going to court, it can still be a time-consuming and costly process. Parties may have to pay for the services of a mediator, arbitrator, or other dispute resolution professional, as well as any fees associated with the proceedings.

Depending on your needs, arbitration can be a good option for parties who want to resolve their disputes efficiently without the drawn-out process and spectacle that can accompany litigation. As arbitration continues to grow in popularity, it is likely to take an increasingly prominent role in the resolution of disputes.

If you are considering arbitration to resolve a dispute, please contact our Dispute Resolution team.