Last edited 28 Nov 2017

How does arbitration work?


[edit] Introduction

Arbitration is a private, contractual form of dispute resolution. It provides for the determination of disputes by a third party arbitrator or arbitration panel, selected by the parties to the dispute. Disputes are resolved based on material facts, documents and relevant principles of law.

Arbitration proceeds similar to regular litigation, with the submission of the issue to a single decision maker (the arbitrator) or an arbitration panel. Their decision is final and legally binding.

Before suggesting arbitration as an option for resolving a debate, or invoking an arbitration agreement, it is essential that there is an understanding about how the process works.

[edit] Stage 1: Initiating the arbitration

The first step is the initiating of the arbitration process. This takes the form of one party making a request that a dispute be referred to arbitration. However, it can be the case that arbitration is included as a contractual obligation.

Arbitration clauses are traditionally found in all standard form contracts used in the UK, often with related adjudication clauses. In the last few years there has been a tendency to set the dispute resolution default at litigation rather than arbitration, leaving the parties to specifically agree to arbitration.

[edit] Stage 2: Appointment of arbitrator

Once arbitration has been initiated, the parties need to agree on the procedure, if it hasn’t been set out in the contract clause already. It must be decided whether to appoint a single neutral arbitrator or a tribunal of three arbitrators. Arbitrators can be appointed either by:

  • The disputing parties directly.
  • Existing tribunal members (i.e. one party appoints one arbitrator, the other party appoints another, and both arbitrators appoint a third).
  • An external party (e.g. the court, or an individual/body nominated by the parties).

The selection process is one of the advantages to arbitration, in that someone can be appointed who has specialist knowledge and a solid understanding of the issues at hand. This is opposed to litigation, where there is no guarantee that the seating judge will have the same level of knowledge.

It is typical for arbitrators to be selected from a pre-approved list of candidates before holding a preliminary meeting to finalise the procedure of the case.

For more information, see Arbitration panel.

[edit] Stage 3: Preliminary meeting

It is usual for a preliminary meeting to be held between the parties (with their legal representatives) and the arbitrator, to examine the dispute and settle on the appropriate process and timetable for proceedings.

[edit] Stage 4: Statement of claim and response

The claimant provides a statement of claim in which they summarise the matters in dispute and the remedy they are seeking. The alleged facts are provided but it doesn’t include the evidence that will attempt to prove those facts.

The respondent then provides a statement of response in which they concede or deny the claims made against them. They may also provide a counter-claim, which will require the claimant to make a reply.

[edit] Stage 5: Discovery period

Depending on the arbitration agreement or the terms decided on in stage 3, a discovery period may be used for each party to examine and investigate any background information. This means that the parties must list all the relevant documents which they have at their disposal and share them with the other party.

[edit] Stage 6: Interchange of evidence

The written evidence is exchanged between the two parties and provided to the arbitrator for review.

[edit] Stage 7: Hearing

The hearing is a meeting that is held where evidence and witness statements are presented to the arbitrator for questioning or clarification. A hearing can be avoided if it is possible that the documents themselves can deal with the issues.

The hearing begins with the arbitrator swearing in the parties and any witness who will testify. It is not as formal as a litigation hearing, although the basic procedure is the same in that both sides have the opportunity to present their case and listen to the other’s. They can also question and challenge evidence presented as well as any witnesses.

At the end of the hearing, both sides’ lawyers can present the arbitrator with a summary of their evidence and laws that they deem applicable. The arbitrator then retires to consider the award.

[edit] Stage 8: Award

Once they have considered all the information and evidence, the arbitrator will make a decision and dictate the award. It is typically written to summarise the proceedings and explain the reasons for the decision. The decision will be considered binding, unlike mediation where it is only advisory. There is generally limited recourse for appeal, although the award is often reviewable by the courts.

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