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• What is arbitration?
Topic Content
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Moffitt, Michael L., and Robert C. Bordone, eds. The handbook of dispute resolution. (John
Wiley & Sons, 2012) 1.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
The critical comparisons are between the final methods and all the others,
and between the two final methods of arbitration and litigation.
a) Litigation
Litigation is the term used for the process of resolving disputes through
the courts, a system of the state in which the jurisdiction is located. The
term “litigation” is from the Latin words ‘lis’ meaning dispute and ‘agere’
which means ‘to set in motion’. Litigation is different from other
mechanisms of dispute resolution in that it is carried out solely by the
court established the by the government. Courts are the manifestation of
the government, they play exemplary roles in the society, keeping in place
and justifying a particular view of how the social world is, and how it ought
to be.
The courts, being organs of the state, must ensure that all their decisions
are consistent with each other and with ‘public policy’, down to the finest
detail. This means that litigation must be held (with very few exceptions)
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Litigation is a ‘default option’ for the disputing parties; even if one of the
parties is unwilling to litigate, it can be compelled to do so through the
court. It is also the ultimate go-to option to which the parties can resort
if all other methods of dispute resolution have failed. Providing the society
with the working system of criminal and civil justice is nowadays seen as
an obligation of every government.
Every country in the world has its own system of civil justice. So, for
instance, litigation in England will be in an overwhelming multitude of
respects different from litigation in France.
It can be said that all other methods of dispute resolution are alternative
to litigation, and are therefore termed Alternative Dispute Resolution
(ADR) methods.
b) Arbitration
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
a) Negotiation
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Broadly speaking, there are two main theories of negotiation: the problem
solving approach and the competitive theory.
These approaches are not the only ones. In fact, during the course of a
negotiation or series of negotiations the approach may alter, perhaps
several times. One side may use one approach, and the other a different
approach.
• The identity of the negotiating party: what is at stake for them in the
negotiation? If the negotiator is a lawyer, there might be a sense of
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
• The value of the dispute: if small, the parties are unlikely to spend
much time negotiating and are more likely to be able to compromise.
The cost of lengthy negotiations, in terms of time or legal fees might
be prohibitive in comparison to the value of the dispute, however
sometimes the value is not the only influence; there is sometimes a
‘point of principle’ at stake!
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
alter their style (without perhaps even knowing it!) when negotiating
with a member of the opposite sex.
These factors are not exhaustive and there may be others in any particular
negotiation. Also, it is likely that more than one will be present in any
resolution attempt. Some will be more important than others in each
individual negotiation.
b) Mediation
Mediation occurs where a third party assists disputants to settle their own
dispute. In its generic form the mediator does not make a decision, much
less impose it. Whatever the particular procedure, any settlement made
by mediation can generally only have the force of any agreement, that is,
the force of contract. This is the common feature of mediation and
negotiation. Mediation procedures do not need to conform even to the
basic legal principles required in arbitration. For example, a mediator may
meet separately with one disputant (and frequently does) without
damaging the process. In arbitration, such an occurrence would be a
serious breach of the principle of fairness which upholds a party’s right to
know the case against him; all evidence must be provided openly between
the parties, from one in the total knowledge (that is, copied if
documentary) or in the presence of the other (if given orally or by way of
inspection).
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
c) Conciliation
a) Adjudication
While forms of expert evaluation have been used for a long time, this Act
has given this process a specific definition, essentially as an investigative,
evaluative, third-party determination that is binding on the disputing
parties unless one or more of them objects within a specified time. There
are few grounds for challenging an adjudicator’s decision: whether he has
jurisdiction; or if he acts in bad faith or is negligent in carrying out his
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
There are many names and varieties of this type of process. For example,
the International Chamber of Commerce [ICC] provides several kinds of
this type of adjudicative process in the services offered by its International
Centre for Expertise and its Pre-arbitral Referee Procedure. A variety of
this process is known as Dispute Boards, or Dispute Adjudication Boards
(DAB) which are becoming more and more popular in construction
industry over the last decades. Many of you will study these in more detail
in later modules.
a) Facilitation
Facilitation is used mostly (but not exclusively) in the public sector for
collective bargaining. A ‘fact finder’ is given information by both sides and
makes additional research into the matter before recommending a
resolution. Facilitation is non-binding.
b) Assisted Negotiation
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
d) Fast-track Arbitration
e) Med-Arb
f) Arb-Med
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
g) Expert determination
The danger with relying on an ad hoc agreement is, of course, as with any
ad hoc arrangement, that by the time the dispute arises, the parties are
already in a state of disagreement and an agreement as to the form of
dispute resolution might prove to be impossible.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
h) Mini-trial
A partial goal of the mini-trial is to have responsible agents for each party
experience the trial presentation of that side’s case first-hand. Ideally,
this should give the parties a better sense of the risks involved in litigation
or arbitration proceedings. A second benefit of such a minitrial is that the
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
This is a court initiated process that uses a “mock jury” to give an advisory
opinion. It is of particular value where constitutional rights are at stake,
a precedent will be set, where government is a party or where there are
numerous parties. Summary jury trials, where permitted, have the
advantage of being backed by courts and give judges the ability to assess
jury responses. There are the same preparations as for a trial in court but
at no more cost and they give the parties their day in court.
This process uses three experienced lawyers to evaluate the legal merits
of a case. It can be applied to an entire case or just part and it is not
promoted by an interest in settlement. It has no precedential value.
Moderated settlement conferences are widely used in, for example, US
state courts with abbreviated presentation.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
l) Court Referrals
However, we have already seen that in England, there are even specific
court practice rules dealing with the duty on the court to encourage
settlement by ADR methods, and even delay the progress of the case
(with or without the parties consent) for this purpose. In fact, given the
strength of the powers that have been held to vest in the English courts,
parties can virtually be economically forced to go to ADR in terms of the
following provisions and case law:
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
• Nigel Witham Ltd v Robert Smith and others (No 2) [2008] EHC
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The role of courts in encouraging settlement does not end there. Many
courts informally (and verbally) actively encourage settlement of cases at
all stages verbally. This takes place most notably on the day of the proof
or trial when the parties themselves will be present. This method can be
particularly effective since the parties will not want to irritate the judge
who believes that the case should resolved amicably by insisting that it
goes ahead. The judge must, however, be careful when expressing his
views that he does not show bias.
2. WHAT IS ARBITRATION?
2
Apologies for the lack of reference which I will check and update
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
There are five important features of arbitration which form the very basis
of this dispute resolution process. They are:
Arbitration will rarely occur unless the parties to a contract agree. There
are some forms of statutory arbitration, but these are rare and need not
concern us in this module.
The agreement will normally provide for arbitration in the event of any
dispute arising out of the terms of the contract. Alternatively, only certain
clauses might be subject to arbitration. We will deal with this later.
Freedom of Choice
Parties are free to select the arbitrators, i.e. third party neutral who
conducts the arbitration (‘arbiter’ was the term traditionally used in
Scotland until 2010). Unlike in public courts, parties can resort to the
expertise, knowledge or authority of a person of their own choosing,
rather than be compelled to accept whatever decision-maker could be
officially assigned within the court to hear their case.
Arbitral tribunal may consist of one or more arbitrators. If the parties fail
to agree on a particular person(s), they can at least agree on a procedure
3
Ibid
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Thus, the parties do not have to accept the judge who happens to be in
court on that particular day, who might have little or no expertise of
what might be a complex subject area. Where the parties chose a
particular person, there can be an element of trust in that person’s
decision on both sides.
Choice can also be exercised in the area of procedure. The parties can
set their own timetable for lodging documents and for a hearing. There
is greater flexibility as to the means by which each party can present its
case – and the way in which the dispute is managed.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Arbitrators cannot act as they like, and ignore basic notions of justice.
They must act fairly towards the parties 4 Subject to that basic
requirement, they have more freedom than judges in the public courts,
particularly as regards procedure. Where the arbitrator does not abide by
the basic rules of fairness, his decision can be challenged in court - this is
not a popular move, since the whole point of arbitration is to avoid
litigation in the courts. In fact, a common feature of arbitration is that
appealing an arbitral award is a lot more difficult than appealing a court
decree. So, for example, it can be more difficult, or impossible, to appeal
an arbitral award where the arbitrator has made an error in law, even
where, had he been correct, his decision would have been different.
4
S 33(1) of the English Arbitration Act 1996
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
4. In arbitration, the costs of the venue, the arbitrator and all other
ancillary costs have to be met by the parties - in a court action, the
state meets these costs. Any saving in resolving the dispute more
quickly may be lost on these administrative outlays. The costs can
spiral even further if a central administration is being used to run the
Arbitration, such as in International Chamber of Commerce (ICC)
arbitration.
Overall, it is often the case today that arbitration is more expensive than
litigation, although traditionally costs were listed among the advantages
of arbitration.
Privacy
Almost all court proceedings are held in public. This means that members
of the public can come along and watch, and that includes the press. In
addition, all papers are accessible to members of the public, including the
press.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
wrong hands, such as competitors. Where the desire for privacy is strong,
the company may overlook any disadvantages of arbitration, in order to
ensure secrecy.
1. The contract itself. The parties can agree detailed provisions on the
identity of the arbitrator, the timetable, the venue, the powers and
duties of the arbitrator, costs, etc. in the agreement itself. This is rare,
since it clutters up the contract – and requires additional areas for
negotiation.
2. The rules of a body. There are dozens of sets of arbitration rules which
exist to cover all kinds of arbitrations. These rules are usually
maintained by the associations who have written them and they may
also provide a framework within which the arbitration could take place,
at a cost, of course. Alternatively, the contract can make reference to
the rules of a body with the procedure being agreed to by the parties
after the dispute arises. A set of rules may also be fashioned by the
parties (and incorporated in the contract) using the best parts of
various sets of rules. Finally, different rules can be used in different
contracts to suit the individual case. See below the section on
Institutional Rules.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
3. Where the parties have not agreed detailed rules and have not
incorporated the rules of an association into their contract, but have
agreed to arbitrate, the general applicable law on arbitration (for
example, Scots Law, English Law) fills the gap. Sometimes, provision
is made in the contract for most of the procedure, but not all. Where
there is a gap, for example, no mention of the arbitrator’s powers in a
particular situation, the background applicable law of the chosen or
lega y appointed country is used.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Each major institution may have different sets of rules for different
procedural contingencies, e.g.
Normally, each major institution will have its own fairly sophisticated
procedural provisions enshrined in tis Rules; and there is also usually a
recommended arbitration clause based upon the previous experience of
this particular institution, and incorporating the Rules into the parties’
agreement.
Of course, there are thousands of sets of rules across the world that can
be used. We will look at some of the most commonly chosen sets of rules
in commercial contracts.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
This is one of the main arbitral bodies in the UK, with facilities aimed at
training and appointment of arbitrators, set up in 1915. It has around
11,000 members in over 100 countries. It is a registered charity; there
is a Scottish branch as well. It has two main sets of general arbitration
rules:
Both sets of rules are based on the English Arbitration Act 1996. They
can therefore apply to domestic or international arbitration. The rules can
be varied by agreement, but not after the arbitration begins unless the
arbitrator consents.
The controlled cost rules are designed to encourage both the arbitrator(s)
and the parties to keep costs low.
The ICC rules are among the most commonly used rules for international
arbitration but they can also be used for domestic arbitrations. The
Chamber has its headquarters in Paris where the administrative office
(Secretariat) and the Court are based. Arbitrations under the rules take
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Finally, the ICC will also act as appointing authority when provided for by
the parties and where the UNCITRAL Model Law applies, or in any agreed
ad hoc arbitration. There is a separate set of rules governing procedure.
The ICC has promulgated some new rules which came into force on 1
January 2021. These are under review by us on this course and we will
provide an update in due course, if there is anything relevant here.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
The website of the Court, including copies of the current rules, costs and
other information, can be found at:
http://www.lcia.org
The LCIA have also recently updated their rules – to the extent that
these bear on the subject matter of the module, we will update in due
course.
The AAA has many more domestic cases than international ones.
However, this institution is becoming more important in international
terms and is dealing with more and more international cases. It handled
187,500 cases in 2011 and they have 22 offices. They also hold a long
list of subject specific rules – including for large scale construction
disputes. Their website address, where their rules and further information
about their work can be found is at:
http://www.adr.org/
This is the main dispute resolution service in Asia. It was set up in 1985
by business people and professionals in Hong Kong and is self sufficiently
funded (having previous had some government funding).
http://www.hkiac.org/
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
This Centre is based in Washington, D.C., in the U.S. It was set up by the
World Bank in 1966 under the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States. It
arbitrates disputes between companies and States only, in other words
not disputes between companies or private individuals. As the name
suggests, it deals with investment disputes only and not commercial
disputes.
There are arbitration and conciliation rules, effective from April 2006.
https://icsid.worldbank.org
Regional Centres
Some arbitral rules and procedures are not world-wide but are instead
designed to cater for disputes involving countries in a particular
geographical area. For example, there are centres in Europe: Lyon, Lille
and Milan; and in the Middle East Asia and Australia - Cairo, Kuala
Lumpur, Sydney, Singapore, Hong Kong.
When choosing which arbitral rules to incorporate parties should take into
account certain factors. These include:
• Cost: compared with litigation and also compared with other arbitral
rules; some rules attached to institutions can lead to the costs of
arbitrations spiralling, particularly where there are significant
administrative costs involved.
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
• Party autonomy: does the arbitral tribunal keep close control over
procedure or do the parties have freedom to agree a timetable and
other procedural rules? Is a tight and inflexible timetable better?
There are some other general options that can also be considered:
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LLM228: Arbitration Law, Practice and Procedure - Topic 1: Arbitration in Context
Consideration should also be given to the fluid nature of the rules. Unlike
legislative arbitration regimes, the rules of an institute will sometimes
alter radically, removing any advantage gained by one of or both of the
contracting parties by selecting the rules. The rules which apply, unless
otherwise provided for in the contract or by the rules themselves, will be
the rules which exist at the time of the arbitration, not when the contract
is concluded or when the dispute arises.
Further Reading
• Nigel Blackaby and Constantine Partasides, with Alan Redfern and Martin
Hunter, Redfern & Hunter on International Commercial Arbitration, (6th ed.,
2015), chapter 1.
• Fraser P. Davidson, Arbitration (W.Green, 2nd Revised edition, 2012),
chapter 2.
These are just some suggested titles. As always, you are encouraged to read
around the topic as much as possible.
Topic Activities
Please post your thoughts on the below in the forum for this topic. It is a
useful exercise in reflecting on the blend between what is set out above and
“real life”. It will also some sharing of experience. It will also help with getting
back into the relevant methods of writing and study.
Question:
Consider a dispute which has arisen in the course of your employment and describe
it briefly (without sharing any confidential information). It can be about anything
and of any consequence.
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