Arbitration, a form of alternative dispute resolution (ADR), is a process for the resolution of disputes employing an Arbitrator, outside the court system.
The parties to a dispute refer it to arbitration and agree to be bound by the arbitration decision “the award”.
The Arbitrator reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.
Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non binding.
Non-binding arbitration is similar to mediation in that a decision cannot be imposed on the parties. However, the principal distinction is that whereas a mediator will try to help the parties find mutually agreeable outcome, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the amount of damages payable.
Binding arbitration is a proceeding in which a dispute is resolved by an impartial arbitrator or arbiter whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. There are limited rights of review and appeal of arbitration awards.
What are the benefits ?
Parties often seek to resolve disputes through arbitration because of a number of perceived potential advantages over judicial proceedings.
In contrast to litigation, where one cannot “choose the judge”, arbitration allows the parties to choose their own tribunal. This is especially useful when the subject matter of the dispute is highly technical: arbitrators with an appropriate degree of expertise (for example, quantity surveying expertise, in the case of a construction dispute, expertise in commercial property law, in the case of a real estate dispute, and Family Lawyers in a Family dispute, can be chosen).
- Arbitration is often much faster than going to court and accordingly, even in very complex disputes is much more cost-effective
- Arbitral proceedings and an arbitration award are generally non-public, and can be made confidential
- In arbitration proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied
- Because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments
- In most legal systems, including the England and Wales, there are very limited avenues for appeal of an arbitration award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability
- Considerable amounts of time and money are saved. In many instances, injustice is avoided and because adjudication, like arbitration is a confidential process, professional reputations can be salvaged.
- Strictly speaking, statutory provisions that apply to certain aspects of construction adjudication do not apply to procedures in other spheres of activity. However, it is a generally accepted practice for parties to incorporate simple adjudication rules or procedures into their contracts that replicate the statutory procedures.
- Equally, perhaps in circumstances where mediation is not suitable because the parties consider that an independent determination should be made, there is nothing to stop them using adjudication as their chosen form of dispute resolution.
- Adjudication is eminently suitable not only for the resolution of building related disputes but also a range of commercial, housing and land matters including service charge cases or those involving the provision of substantial amounts of goods and services.
Mediation, conciliation and arbitration are well known as alternatives to legal procedures within the court system. Adjudication, is less well known and is rarely mentioned.
In the UK Adjudication achieved prominence following the passing of the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act).
Adjudication should not be seen as a cut price alternative to arbitration. However, when the 1996 Act came into force it was acknowledged that whilst arbitration is an excellent, cost effective and time saving mechanism for the resolution of large land and building related disputes, it can be relatively costly. Small and medium sized building contractors and indeed individual members of the public will often be deterred not only from pursuing court proceedings but also from going to arbitration.
This in turn can mean that payment of sums of money that should be paid at different stages of a construction programme or similar project can be delayed for very significant lengths of time, simply because of the lack of available dispute resolution mechanism.
Tacked on to the 1996 Act was a series of provisions which permit one party to commence a very abbreviated, less complex procedure in order to secure payment or other related complaint and allowed for an expedited timescale.
In essence, once the adjudication procedure has been invoked, the parties are required to look for evidence in anticipation of the appointed Adjudicator making a binding decision within 45 days.
This process does not remove the input of lawyers. However, it does ensure that wherever possible sufficient evidence is produced at the initial stages in order to ensure that the party against whom the complaint is made is able to make out, where feasible, a substantive defence or indeed settle the matter.
The process involves the adjudicator asking effective and investigative questions and he/she has the power to give orders and directions. Adjudicators are therefore able to promptly and effectively determine cases at a fraction of what it would cost parties to go to court. Because the adjudication procedures are so effective, adjudicators are able to get at the truth and ensure that one party or another does not act disingenuously.
What are the benefits?
A major benefit of a “short shop” procedure like adjudication is that in many instances it helps to facilitate settlement. Because the adjudication process is instigated promptly, the parties find themselves communicating with each other at an early-stage. The result is that it is less likely that those parties will continue to adopt their earlier entrenched, combative positions.