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Last edited 11 Jan 2018
How does arbitration work?
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 proceedings are 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.
 Stage 1: Initiating the arbitration
Arbitration clauses are traditionally found in all standard forms of construction contract used in the UK, often with related adjudication clauses. NB The Housing Grants, Construction and Regeneration Act imposes a right to adjudication on all construction contracts.
 Stage 2: Appointment of arbitrator
Once arbitration has been initiated, the parties should agree on the procedures to be adopted if these are not set out in the contract. They must decide whether to appoint a single arbitrator or a panel of arbitrators.
Arbitrators can be appointed either by:
- The disputing parties directly.
- A combination of the parties (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, such as a professional institution).
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 required specialist knowledge.
 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.
 Stage 4: Statement of claim and response
The claimant provides a statement of their claim in which they summarise the matters in dispute and the remedy they are seeking. The alleged facts are provided but not the evidence they believe proves 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 then require a response from the claimant.
 Stage 5: Discovery period
Depending on the arbitration agreement or the terms decided 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.
 Stage 6: Interchange of evidence
The written evidence is exchanged between the two parties and provided to the arbitrator for review.
 Stage 7: Hearing
The hearing is a meeting held where evidence and witness statements are presented to the arbitrator for questioning or clarification. A hearing may sometimes be avoided if the documents themselves deal with all the relevant 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 can present the arbitrator with a summary of their evidence and laws that they deem applicable. The arbitrator then retires to consider the award.
 Stage 8: Award
Once they have considered all the information and evidence, the arbitrator will make a decision and dictate the award. This is typically a written award that summarises the proceedings and explains the reasons for the decision.
The decision will be considered binding. There is generally limited recourse for appeal, although the award is often reviewable by the courts.
 Related articles on Designing Buildings Wiki
- Alternative dispute resolution.
- Arbitration Act.
- Arbitration panel.
- Arbitration v Adjudication.
- Causes of construction disputes.
- Construction disputes.
- Contract negotiation.
- Dispute resolution boards.
- Expert evaluation.
- How to become an arbitrator.
- Negotiation techniques.
- Pendulum arbitration.
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