Arbitration is "privatised litigation" meaning that disputes are resolved privately.
This form of ADR deals with mostly business disputes and is favoured by the commercial world and trade unions.
It is governed by the Arbitration Act 1996 of which Section 1 states:
Arbitration should "obtain fair resolution of disputes" without delay, expense and to do it fairly. Courts should never intervene.
Arbitration is impartial as parties are free to decide the case how they want.
The Process of Arbitration
The process is carried out by an arbitrator and the procedures in which they have to follow are laid out in the Arbitration Act 1996.
The conflicting parties must agree in writing to attend because it is not compelling, however most do attend because it is much easier than going to court.
Some commercial contracts include a Scott v Avery Clause which requires partied of the contract to attend arbitration should a dispute arise.
The arbitrator does not need to be a judge or lawyer but they are expected to be a legal expert in the field of the dispute.
The proceedings must be done in accordance with the stipulated rules in a judicial manner making the process formal.
The parties usually have a say in who the arbitrator is adding some flexibility to the process but the arbitrator has the final say in the procedure to be adopted.
The first stage of arbitration is an initial meeting between parties called the preliminary meeting. Here, the arbitrator decides on the procedures.
The arbitrator will try to achieve a consensus (agreement) between the parties so they can issue a consent order - reducing the risk of the ultimate arbitual award being challenged in court.
A fixed date and time is set to suit the parties which adds to the flexibility.
The dispute can be resolved or the parties may come to some sort of understanding.
Advantages of Arbitration
- The process is flexible as a date and time is set that suits the parties.
- The parties are able to choose their arbitrator who can be a specialist in the required field.
- Courts are not involved so the process is private, however the parties reserve the right to go to court if the dispute cannot be resolved.
- There are no delays. Arbitration is cheap, easy and quick.
- The Scott v Avery Clause compels people to attend.
Disadvantages of Arbitration
- There are no appeals for arbitration so parties may need to take the matter to court if they're not happy with the outcome.
- The process may be considered too flexible so it could take too long to get a resolution.
- Professional arbitrators are expensive to hire.
- If no legal professionals are used, the process is no different to a judge making the decision so it isn't fair.