Lecture 8 – Commercial Arbitration
What is arbitration and its characteristics?
• What is arbitration? Does it fall within the widely accepted definition of ‘Alternative Dispute
Resolution’?
• Characteristics of Arbitration:
• An agreement between the parties to refer their disputes to arbitration
Consensual agreement between the parties that if there was any dispute, they will
resolve it through arbitration. If there is no such agreement between the parties, then
you cannot resolve a dispute using arbitration.
• A tribunal to resolve the dispute
Need a third party to resolve the dispute, or a group of individuals. Both parties might
appoint someone each.
• A dispute between the parties to be resolved by the process of arbitration
Must be some kind of disagreement, one party has a claim another is refusing that
claim. Some disputes cannot be resolved through arbitration, they must go to court.
• A judicial procedure to resolve parties’ disputes fairly and finally
Not whatever way they want, must be a proper procedure listening to both parties
and what they have to say. The same way that the courts do, the decision must be
final.
• A binding award between the parties.
Same as a court decree, it is final. It will be imposed in the same manner as an imposed
judgement of a court.
The contractual element of arbitration
Based on the contract between the two parties.
• No arbitration without the agreement of the parties.
• Principle of Separability: Arbitration agreement should be treated as a separate agreement
distinct from the main contract (Sec. 5 of the Arbitration (Scotland) Act 2010). Arbitration
agreement is binding on the parties even if the contract has not come into existence because
the main agreement is separate.
• Principle of Competence – the tribunal may decide on its own jurisdiction. You can approach
the courts to review the decision of the tribunal, objecting to the jurisdiction. Whatever the
decision is of the court, it will be final.
• Can only appeal to the courts if there is a lack of jurisdiction, asking the courts to review, and
in the precision being followed by the arbitrator. Cannot go to the courts to review the merits
of the case.
, The judicial element of arbitration
• Arbitrator will act in the same way as a judge appointed by the state
Normally appointed by the parties or give authority to a third party to appoint them. Anyone
who is an expert in the field of dispute. Not qualified judges, they are experts in their field.
They act in same manner as a judge. They need to be impartial and they must be independent,
even if they are appointed by a particular party.
• Basic procedural right of due process: ‘Magna Carta’ of the arbitral process
Respect the procedural rights of both parties.
• Arbitral award will have the same effect as a court judgement between the parties
ADR and Arbitration
• ADR – Mediation and Conciliation
• Similarities:
• Being forms of dispute resolution, both involve the services of a private neutral third
party outside the public court system
• Both are confidential processes. Not open to the public, closed hearing.
• Differences:
• ADR merely help parties to find an agreeable resolution to their dispute; arbitration
decides on the merits of the dispute in a binding fashion
• End result of ADR is an agreement between the parties, not a binding decision as
under arbitration.
Arbitration and Litigation
• Difference: Unlike litigation
• In arbitration, dispute is decided by the judges of parties’ choice
• In arbitration, parties are not bound by the procedural rules of any given legal system
but may choose their own procedure
• Finality, rather than meticulous legal accuracy, is the preference in arbitration
• Arbitration is generally confidential to the parties – its hearings are not open, and the
pleadings are not available for public perusal.
• Difference: Unlike litigation
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