Arbitration: Nuts and Bolts

Practice Areas

By: Parth Jain

Alternate dispute resolution (ADR) in recent years has found acceptance as an effective substitute to traditional litigation as both courts and litigants alike, look for faster, cheaper and effective means to resolve their disputes. ADR comprises of arbitration, mediation and negotiation. Each method has its own unique set of advantages and its use depends on the nature of the dispute at hand. But, without a doubt, at the forefront of ADR is arbitration which has seen a meteoric rise in its use. This article lays out the basics of this procedure and hopes to make it easier for readers to understand this form of ADR.

 What is arbitration?

Arbitration is a process in which the parties agree to have their disputes or differences decided by one or more neutral persons (arbitrators) – in lieu of court system – for binding determination in accordance with procedures, structures and substantive legal or non-legal standards chosen by the parties. They bind themselves to accept that decision, once made, whether or not they think it right.

Who can refer a dispute to arbitration?

Individuals, corporations, and governments, all can use arbitration to resolve their disputes. But, for a dispute to be referred to arbitration, the parties should have agreed in writing to do so. This agreement can be formed either before or after the dispute has arisen. While the agreement to arbitrate can be contained in something as informal as an exchange of letters, it is imperative that the agreement to arbitrate be in writing.

What disputes can be arbitrated?

Arbitration can be used to resolve a variety of disputes including disputes arising out of commercial relationships, consumer transactions, and employment contracts.

Why arbitrate?

Depending on the nature of the dispute and the parties involved, the benefits of the arbitral process may vary. But broadly, following are the advantages of arbitration over traditional litigation:

Speed: Parties have the ability to control the pace of the arbitral process. The arbitration agreement can record the timeline for the arbitral process and the arbitrator(s) is bound to adhere to the same.

Cost Effective: The arbitration agreement could contain a ceiling on the budget for the arbitral proceedings. This allows parties to control the costs and also have a fair idea of the expenses they would incur unlike litigation, where the parties have no control over the costs incurred.

Procedural flexibility: The arbitral process can be as informal as the parties want it to be. The arbitral process is not bound by the rules for taking evidence as courts are. In fact, the parties could decide that the entire dispute should be decided by the arbitrator(s) based solely on documents presented by parties without the need for depositions, oral testimony and interrogatories.

Finality: The arbitral award is final and binding on the parties and can be set aside on very limited grounds.

Enforceability: An arbitral award can be enforced in the same manner and to the same extent as a decree of a court.

Privacy: Unlike court proceedings, arbitral proceedings are private proceedings between the parties. Except under limited circumstances, all the participants including the arbitrator(s) could be bound by the parties’ agreement to keep the proceedings and the resulting award confidential.

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