Dispute Resolution: Analysis of Arbitration - Essay Example

DISPUTE RESOLUTION: ARBITRATION Arbitration unattached to specific forum Arbitration is considered as a formal dispute resolution mechanism that is governed by Commercial Arbitration Act 2010 NSW where two or more parties channel their dispute through an independent third person or regarded as an arbitrator for the determination. It is that the arbitration process is carried out in accordance with the principles of the natural justice with procedures that are varied by parties to fit the size and the complexity of the dispute being solved. In a small case, for instance, it may be heard on grounds of documentary submissions of the grievances alone that may reduce the cost significantly. There are the more complex cases that may that require the judicial style and intervention of hearing where formal claims and the defenses are lodged. In such as a case, evidence is forwarded by either of the party and then tested by the cross-examination. The result of arbitration is known as Award that is enforceable in the similar manner to that of the Court judgment. In such a case, the arbitration process is regarded as unattached when it is not bound to the laws of the country of origin1. The award for arbitration that is Unbounded is often unattached from the laws of the country of its origin. The courts can take two approaches that are contrasting in the enforcement of an award set aside in the origin country1. The approaches are either the delocalized approach or the territorial approach. In the territorial approach, the decisions of the court defer from the court award that has been set aside by the original country. Kronke argues that the seat law either designates the law that is applicable or directly governs the arbitration agreement2. Moreover, it governs the composition and the formation of the arbitral tribunal inclusive of the form and procedure of the award. At the arbitration seats, the court provides an oversight to ensure that the procedures are functioning appropriately after which it confirms and sets the award aside at the end of the process3. Therefore, in this approach, the seat holds the arbitration to the legal orders of the territory where the arbitration is taking place4. As for the delocalized approach, the arbitration seat is chosen for the convenience sake. The operation of the arbitrators is on the international forum which is completely unattached to any national forum. The agreements solely guide this approach. The arbitral tribunal is at liberty not to operate as the territorial courts since they have their seats in the territory. In addition, the powers of the arbitrators are not derived from the territory where they have their seat. The powers are instead derived from the recognized legal orders within certain conditions such as the award and the validity of the agreement of the arbitration. The above reason explains why the arbitrators are often perceived to be lacking forum. This leads to quite a number of consequences. The arbitrators are never bound to apply rules that are procedural in force of the territory of the arbitration seat. Since they have no forum, they have the leverage of not following the law rules chosen for a forum5. This type of dispute resolution is either voluntary of compulsory (mandatory). However, arbitration that is mandatory emanate from a contract or a statute that the parties in question enter voluntarily. They make an agreement of resolving existing conflicts, as well as, future conflicts even if they do not know the future likely disputes that are bound to surface. Moreover, it can either be non-binding or binding. In non-binding arbitrations, the third party just like mediation cannot impose decisions on the involved parties. In the mediation process the third neutral party facilitating the process will often attempt to establish a middle ground that suits the parties in the case. The parties have to compromise on their stands for the dispute to be resolved. However, in the arbitration process, especially in the non-binding, the arbitrator is never involved in the settlement process though they can determine liability and the damages that are payable. However, arbitrations that are not binding are usually perceived on technical ground as not arbitration in that arbitration must be binding. Gary arbitration as a proceeding employed for the resolution of disputes by an adjudicator that is impartial who makes decisions that the parties involved have agreed on or decreed by the legislation to be not only binding but also final. The rights to either review or appeal awards that emanate from arbitration are usually limited6. Benefits of solving conflicts through the arbitration process There are quite a number of perceived reasons as to why parties usually prefer arbitration process instead of the judicial processes in the courts of law. In the litigation process, the parties in question do not have the leverage of choosing the judge. This is in contrast to the arbitration where the parties in the disputes have the opportunity to choose their adjudicator or tribunal. It is crucial in the situations characterized by highly technical subject matters entailed in the dispute. The second benefit or rather advantage of the process is that it tends to be relatively faster than the litigation process in the courts of law. In subjects related to business, it is often cheap and flexible. In addition, the proceedings and awards in the arbitration have the leverage of maintaining confidentiality and can also be non-public. Besides, in the process of the arbitration, the parties in dispute can chose the language they deemed they are comfortable with unlike in the judicial proceeding where the county’s official language is employed by the competent court. Some nations find it much easier to enforce arbitration awards in comparison to the verdicts from the court proceedings. The final advantage is that most legal systems have limited provisions for appealing awards that emanate from arbitration. This often limits the liabilities associated with appealing cases and the dispute duration. These benefits give the parties more freedom in the process of arbitration than the litigation process would. Arbitration process is considered as a more effective way of solving disputes that arises among parties. The arbitration process is cheap as well as easier to solve within a short period of time as agreed by the parties unlike the court process. It ensures that the judgment delivered is sensitive to the needs of the two parties and it is dependent on the agreement that is set up among the parties involved. This makes arbitration not only effective, but also enhances good relationship among the parties involved since the decision is dependent on the consensus reached during the determination of the case7. Disadvantages of arbitration Strasser and Randolph argue that in the arbitration process that involve either the employees or the consumers, sometimes the agreements are contained in small prints or secondary agreements. The employees or the consumers may not know in advance having made mandatory binding agreements by taking the job or buying products. The binding and mandatory arbitration swipe away the rights of the parties in dispute to access courts where a judge or jury can made a verdict concerning the dispute in question. Moreover, some arbitration processes compels the parties in disputes to pay the arbitrators. This has the potential of adding legal costs even in disputes that are small in magnitude. In addition, in some system and agreements of arbitrations, there is lack of recovery of the litigant’s fees thus making it impossible and difficult for the aggrieved party to have a legal representative8. However, the majority of agreements and codes have the provision of having a legal representative as granted in courts. Suppose the forum for arbitration or the arbitrator rely on repeated business for the company or corporate involved, then they proceedings are likely to rule against an employee or a consumer. Furthermore, the decisions that are erroneous are difficult to overturn since there are limited channels for appealing the case by an aggrieved party. The process of arbitration is often perceived to be faster. Andrew and Keren assert that in some cases that may not hold in that some processes contain multiple arbitrators who may provide schedules for hearing cases that are long hence causing delays9. In some of the legal systems, the enforcement options or alternatives from arbitration awards are fewer compared to the judgments made in the judicial proceedings. In arbitrating, the applicable laws contained in the rules may not bind the arbitrators who in turn cannot disregard or evade to provisions of the laws.10It may also be characterized by either non-existent or limited discovery. The other limitation of this technique is the arbitration awards are rarely enforced directly and when an individual is seeking an enforcement of the award, he or she is compelled to employ the judicial remedy for the confirmation of the award. The arbitration process is usually perceived to be relatively cheap in comparison to the judicial proceedings. However, there are limited of attacking the award from arbitration in the courts. Therefore, the efforts for the confirmation of awards may at times be fierce and the legal expenses may be more than anticipated. This negates the economic incentive that is often perceived when it comes to arbitration as a dispute resolution mechanism. Commercial arbitration and the validity of arbitration agreement in UK Gary (2009) elaborates that across the word parties inclusive of those who do not have any connection with England often choose London as their arbitration seats. Domicile parties in the jurisdiction regularly choose international arbitration with the aim of resolving disputes on cross border and in most cases London is often chosen. In this particular jurisdiction, claims that are contractual and those not contractual are referred to arbitration and may encompass disputes such as competition, intellectual property (IP) rights, and statutory claims. Nigel (2009) illuminates that matters pertaining to families or crimes are never referred to the arbitration. The number of proceedings in international arbitration has dramatically increased with time. The Queen Mary College report on international arbitration survey in 2010, highlights London as one of the most popular seats for arbitration in the entire world. This is attributed to the London’s status as not only a major world market but also a financial centre. It has a reputation for impartial and neutral jurisdiction and its courts have a good record in the enforcement of agreements both to arbitrate and the rewards of arbitration. The arbitration Act of 1996 consists of a modern framework that is coherent for international and domestic arbitration. This act sets out the principles arbitration and laws of arbitration within the jurisdiction. UNCITRAL model law significantly influences the Arbitration Act11. There are several provisions that are mandatory in the Arbitration Act which are in the schedule. They are aimed at the incorporation of the interest of the public. In the section 9 to 10 of schedule 1, the court is granted the take part in proceedings when the agreements of the arbitration and other provisions that are related are breached. In section 12 and 13, the courts have the powers to extend the limits of time that had been agreed on, as well as, the application of the Limitation Act. In addition, there are provisions that deal with the position of the arbitrator. For an instant, the court has the power and authority to remove and arbitrator. In addition, there are provisions that incorporate events such as the death of the arbitrators. The provisions of mandatory legislation also entail liability of the parties in dispute for fees and the arbitrator’s expenses while section 24 contains the immunity of the arbitrator. The tribunal in the arbitration process has the general task to act impartially and fairly in the arbitration process. The tribunal has the muscle and ammunitions to hold the award for the non-payment of the fees and expenses of arbitrator. Section 66 of the schedule also has the provision for award enforcement while that of 67 and 68 provides the grounds that allow the award to be challenged12. The law of limitation is applicable to the arbitrary proceedings. The Arbitration Act illuminates that the Foreign Limitation Act of 1984 and the Limitation Act of 1980, as well as other acts are applicable to the proceedings of the arbitration as they are to the court judicial proceedings according to section 13: 1. A claimant in the proceedings in reference to the arbitration has to begin the processes within the time schedule as the claimant in the court or litigation dispute resolution. In the English or the UK laws, the there is a limitation period of six years for a contract claim which commenced from the date in which the contract is breached. The limitation period for a claim perceived to be torturous is 6 and begins to take effect from the date the damage surfaced or realised. In addition, the Arbitration Act provides the parties involved with the leverage of agreeing when the process is to commence and in the events that there are not agreements on the commencement of the proceedings, it provides a provision of what is to happen. If the process fails to commence within the time frame hampers the right to begin the arbitration. According to section 12, the court is conferred the powers by the Arbitration Act to extend the available time in circumstances that are exceptional. For an instant, if one of the parties’ conducts make it unjust or rather difficult to hold the other to the terms of the provision of the limitations that are strict13. It is prudent to know that in the case where the contract is governed by the foreign law the limitation period of the foreign law will hold or will be applicable. Some of the most common arbitration organisations in the UK are the International Chambers of Commerce (ICC), the Charted Institute of Arbitrators (CIArb), International Centre for Dispute Resolution (ICDR), and the London Maritime Arbitrators Association (LMAA). In the arbitration agreements, there are validity requisite requirements for the purpose of the enforcement. In reference to the formal or substantive requirements, the arbitration agreements has to be in writing though it is not mandatory for the parties to sign it. The forms of writing requirements are as expansive as it also entails agreements on oral basis that are recorded by either of the parties or by a third party though the parties involved must give the authority. In case the oral agreement is not recorded in writing is often perceived to be outside the Arbitration Act ambit though it can be enforced under the principles of the common law. The second requirement is the agreement concerning the separation arbitration. The separability doctrine is recognised hence the separate arbitration agreement is rarely needed. It establishes that the contract and the arbitration agreement are separate in the manner in which it is employed in resolving disputes. This agreement of the arbitration has the potential of surviving either the breach or the contract termination by forming the orders for dealing with liability disputes within the contract that is before and after the termination. The third agreement is the Genuine Arbitration Agreement. In this type of agreement, the court provides the clear distinction between arbitration proceedings and arbitration that do not qualify under the Arbitration Act. On the optional or unilateral clauses in the choice of arbitration, the courts uphold options that are perceived unilateral in the clauses regardless of whether the option to litigate or litigate disputes is conferred. There is no consideration by the courts that the dispute resolution clause that is unilateral infringing the rights of the subject party without the party benefiting. It is common on the rationale for the provision of the contract to grant an advantage to just for one party. The Arbitration Act section 7 provides that the separability doctrine is applicable to the agreements by making it clear that the agreement binds even if the contract does not exist. The invalidity or failure of the contract to align with the arbitration agreement fails and becomes invalid. “In joint stock company (Aeroflot Russian Airline) v Berezovsky and other, the court considered the validity test of the arbitration agreement under Arbitration Act 1996. The court made the consideration of the application to challenge jurisdiction in regard to the jurisdiction clause, as well as staying to the favour of the arbitration14.” Breaching of Arbitration Agreements as per the UK laws One of the ways in which arbitration agreement is breached is through the proceedings in court. Under section 9 of the Arbitration Act, a party has the leverage of applying to for the action to stay when the litigation begins in the violation of the arbitration agreement. The other way of breaching the agreement is through the clause of valid jurisdiction. In this situation, the parties can contest the jurisdiction through due to several action causes. For example, they can seek the tribunal to rule on the jurisdiction question that is embedded in the Arbitration Act section 30. In addition, the jurisdiction of the tribunal can be objected in reference to section 31. Section 37 of the Supreme Court Act 1981 and the Arbitration Act section 44 provide the alternative for parties in the judicial proceedings concerning the breach of the agreement. An injunction such as the one stated above can be employed outside the European Union (EU) at the beginning of the proceedings that are aimed at challenging an award. However, this injunction is never directed at the foreign court but at the respondent not to take further steps on the proceedings that emanate from violation of arbitration agreement. Joining of a third party There are circumstances where a third party can either be joined in to the process of arbitration or bounded by the award of the arbitration. As a form of dispute resolution mechanism that the contracting parties often choose. Therefore, only parties in the agreement are allowed to arbitrate in the resolution of the dispute since the arbitration involves only the parties in the agreement. However, they can give consent for the third party in an explicit manner. The third party is then bounded by the agreement of the arbitration. Alternatively, the third party can comply to become a party to the proceedings of the agreement. The Contract Act of 1999 in reference to the rights of the third party, a non-signatory to the agreement can be a party to the arbitration. In the event that the third party wants the enforcement of the terms of the contract, the party (third) is treated as a party of the agreement. However, in most cases contracts that are commercial usually exclude the Contract Act of 1999. The arbitration award is only effective to the other parties exclusive of the third party15. Characteristics, qualification and the number of arbitrators If the parties have not reached an agreement on the number of the arbitrators or there are no rules in the arbitral rules, the Arbitration Act sets a default number provision for the arbitrators. The section 15 of the act provides that if the there are no indication in the arbitral rules the number of the arbitrators, the act allows the parties to jointly appoint an arbitrator. In addition, in the event that the parties appoint two or even number in terms of the arbitrators then the act requires another arbitrator is appointed to head or chair the tribunal. On the other hand, if the parties are in agreement that the arbitrators to be 3 then the third will act as the head or chairperson unless the parties suggest otherwise. Besides, if the number is odd and there is no agreement, the orders, decisions, and awards are made by all the arbitrator or the majority decision will prevail. The parties determine the characteristics of the kind of arbitrators they want. The agreement of the arbitration usually dictates the specially qualities and qualifications an arbitrator has to possess. Section 19 of the Arbitration Act illuminates that the court can appoint the arbitrator in regard to the agreement of the arbitration16. Impartiality and independence of the arbitrators The tribunal has the responsibility and duty to act impartially and fairly while resolving disputes through this mechanism in discussion. They have to give equal opportunities to the parties to put across their cases fairly. In order to accomplish this, they have to incorporate procedures that are suitable to specifics of the case in question. Moreover, they have the duty of avoiding expenses and delays that are not necessary, as well as, providing means that are perceived to be fair in the dispute resolution process. It is prudent to know that the appointment of the arbitrators is within the provisions of the Arbitration Act. However, the arbitrators can be removed on several grounds. This is possible if the parties involved in the dispute doubt the impartiality of the arbitrator; the arbitrator lacking the requirements or qualifications as per the arbitration agreement; and the failure of the arbitrator to properly and effectively conduct the proceedings. The parties have the leverage of agreeing on the commencement of the arbitration under the Arbitration Act17. Bibliography Andrew, T, and T Keren. Arbitration of Commercial Disputes, International and English Law Practice. England: Oxford University Press, 2007. Emmanual, G, and S John. International Commercial Arbitration. Netherlands: Kluwer Law International, 1999. Gary, B. International Commercial Arbitration, Volume 1 and 2 . Netherlands: Wolters Kluwer Law & Busines), 2009. James, M. Practical Law. January 22, 2013. http://uk.practicallaw.com/7-520-5644 (accessed May 22, 14). Jonathan, and Adeline. International Commercial Disputes in English Courts 4th Edition. Hart 2010, 2010. Julian, D. M. L, A. M Loukas, and M. K Stefan. Comparative International Commercial Arbitration. Netherlands: Kluwer Law International, 2003. Julian, Loukas, and Stefan. Comparative International Commercial Arbitration. Netherlands: Kluwer Law International, 2003. Kronke, H. Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention. Alphen aan den Rijn. Netherlands: Kluwer Law International, 2010. Nigel, B. International Arbitration. 209. Strasser, F, and P Randolph. "Mediation: A Psychological Insight. Into Conflict Resolution." Continuum 2004, 2004. Read More