ADR - Arbitration Flashcards
What act does arbitration come under?
Arbitration Act 1996
What does s.1 of the Arbitration Act say?
· Decision is made by a Third Party Arbitrator (or panel of arbitrators)
o Acts like a judge
o Has legal and special knowledge
o Independent of the parties
o Sometimes chosen by name by the parties
Charges a fee (usually very expensive)
Process of arbitration
Parties choose to go to arbitration, sometimes as the contract between them requires it
o Arbitration is appointed (either named in the contract or the process to appoint one is explained in the contract)
o Both parties present their case to the arbitrator separately
o Can be by way of a report in a ‘paper hearing’ but can be in person like a court
o Then arbitrator then considers each side and makes a decision
This decision is binding and there are not automatic rights to appeal it
Types of cases arbitration hears
Used most frequently with commercial contracts between businesses
Where a contract includes a Scott v Avery clause (which is common in business agreements), the court will refuse to look at a case until it has been through arbitration first
What kind of decisions are made and when can they appeal arbitration?
· Legally Binding Decisions are made
o Can only be appealed for irregularity (e.g. bribery) or if the arbitrator is shown to have interpreted the law incorrectly
Eval. of Arbitration - what are the positives
Privacy
Award is binding
Arbitrator is an expert
Procedure up to the parties
Eval. of Arbitration - what are the negatives
Can be expensive
Precedent does not apply
Appeals restricted
No legal professional
Privacy - why is it a positive - P-DEV-E
The arbitration procedure is not debated in open court and all proceedings are kept private – this is especially useful for businesses as it ensures their legal dealings are not made public, which can help to preserve their reputation.
However this then leads to a lack of transparency, where private proceedings are sometimes seen as secretive and therefore open to abuse. Also, it is argued that the public have a right to be aware when a well-known business has legal dealings which may affect them
Award is binding - why is it a positive - P-DEV-E
The award made by an arbitrator is formal and can be enforced by the courts, which allows parties to have certainty that their issue will be resolved and the outcome will be actioned.
However there is a limited number of appeal options which can be made against the award, so if the final outcome is unfair, there is little the losing party can do to challenge this.
Arbitrator is an expert - why is it a positive - P-DEV-E
The arbitrator is usually selected as they are an expert in their field, so they should be capable of understanding and dealing with the specific issues in the case, and may have knowledge a judge lacks on specifics of the dispute area.
However, this is not guaranteed – if parties choose their own arbitrator, they may pick someone they trust over someone who has this expertise, which means they may be unqualified to deal with the issue.
Procedure is up to the parties - why is it a positive - P-DEV-E
The parties can choose the venue, date, number of witnesses and format of the hearing, evening doing it via paper hearings or video calls. This makes it convenient for the parties, which can be especially useful for businesses to avoid interfering with business hours
However this lack of structure can make the process seem too informal, and may mean the parties do not take the process seriously.
Can be expensive - why is it a negative - P-DEV-E
ADR is supposed to reduce the costs of court, however arbitrator fees can be very costly, sometimes more than courts. For example, if parties choose an arbitrator from the London Institute of Arbitrators they will charge up to £1,000 per day.
However if parties are using arbitration for purposes such as keeping the legal issue private, parties may feel this cost is justified for the benefits they get from it.
Precedent does not apply - why is it a negative - P-DEV-E
In arbitration, each case is decided on its own merits and not based on rules set down by previous arbitration decisions or by courts. This means there is no guidance for parties on what the likely outcome of their case might be, and therefore no certainty or consistency between similar cases, which can be unfair.
However, this allows for more flexibility for the outcomes to be better suited to the parties, as sometimes the rigid rules applied by the courts may not be right for the specific case being dealt with.
Appeals restricted - why is it a negative - P-DEV-E
Where one parties feels that the outcome of a case is unfair, there is no way for them to appeal this decision, and as the award is legally binding they are forced to comply with it which may be to their detriment – financially or for their reputation.
However, there are a limited number of situations where decisions can be appealed, such as if there is found to be bribery, or if the arbitrator is found to have interpreted the law wrong – which does give parties options if this is the case.
No legal professional - why is it a negative - P-DEV-E
The issue may involve a difficult point of law – especially if it relates to complex company law – and the arbitrator does not have legal expertise. This will create a danger of legal mistakes being made with the award.
However, the arbitrator is usually an expert in the specific issue, so should have an understanding of the law relating to that issue – even if they don’t have general legal knowledge. Also, there is an option for appeal if the law is interpreted incorrectly
