Why Arbitration? Main differences between arbitration and other ADR methods.
In the event of a dispute, domestic or involving foreign elements, you can (and – maybe - you should) go before an arbitral tribunal instead of a State Court.
Why?
According to the Queen Mary University of London – White & Case Report 2021 on Arbitration: “International arbitration is the preferred method of resolving cross-border disputes for 90% of respondents, either on a stand-alone basis (31%) or in conjunction with ADR (59%)”[1].
Which are the most salient advantages of arbitration?
- Flexibility (parties can widely tailor arbitration rules to their needs)
- Confidentiality (arbitration is not public unless the parties agree to a certain degree of transparency)
- Competence of the decision-maker (you can select an arbitrator experienced in the subject matter of the dispute; in litigation, you cannot choose your judge)
- Time-efficiency (most of the arbitral institutions have a “fast-track” procedure, you can obtain the final award in a reduced time)
- Neutrality (in international arbitration, you can choose a neutral venue for the arbitration and neutral persons as arbitrators)
- Enforceability (this is of paramount importance in international arbitration, under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, you can easily enforce the arbitral decision in 172 countries; it is more difficult to enforce a State Court decision)
There are other ADR methods, among them:
- Mediation
- ENE (Early Neutral Evaluation)
- Expert Determination
- Adjudication
- Executive Tribunal
We can briefly sketch some differences between arbitration and each one of the above.
Mediation is not an adjudicative procedure. The mediator has the task to facilitate communications between the parties (in some jurisdictions, it has the power to submit a settlement proposal to the parties and, sometimes, the procedure is called “conciliation”), but it cannot decide: “who is right, who is wrong”.
Regarding the enforcement of a settlement reached during mediation proceedings, the Singapore Convention on Mediation can be of some help, bearing in mind that only 55 Countries have signed the Convention (among them, the People’s Republic of China, India and the United States of America, but not the United Kingdom, the European Union or the United Arab Emirates).
Early Neutral Evaluation (“ENE”) is not binding. In the ENE, the parties appoint a KC or a retired judge to express an opinion (not a decision) on the issues at stake after hearing submissions from both parties. The ENE has a persuasive force, but each party is free to sue the other.
Expert Determination may be binding or not, depending on the parties’ agreement. Parties jointly instruct an expert (not a lawyer) to solve technical (and not legal) disputes. If binding, the Expert Determination can be challenged on limited grounds.
Adjudication is a kind of “mini arbitration” related to a construction contract. It is not usually used in international disputes; instead, it is widely used in domestic (UK) disputes, under Section 108 of the Housing Grants, Construction and Regeneration Act 1996. Usually, there are no hearings, and the adjudicator will file its decision within 28 days after having received the parties’ submissions.
Executive Tribunal is a non-adjudicative form of ADR. Senior representatives from both parties (together with an appointed neutral) form a panel that should try to negotiate a solution on a commercial (not legal) basis. The neutral can issue a non-binding opinion.
In the other “drops”, we shall lead you -step by step - inside the complex and fascinating world of arbitration from its beginning (the drafting of the dispute resolution clause) to the very end (the enforcement of the award). Follow us!
If you want to know something more about our services or if you have questions regarding Arbitration and ADR, send an e-mail to: arbitration@mezzlelaw.com
[1] QMUL Arbitration Report 2021, p. 2
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