Arbitration

I

Introduction

Arbitration, system of settling disputes by reference to an independent judge, following an agreement by the parties. Arbitration is a way of dealing with issues, most commonly in commercial matters, without recourse to law: it is considered to be cheaper and quicker than a formal law case. It may also enable a matter to be settled with less acrimony, which is valuable if the parties are to deal with each other in the future, under the same contract or under another.

II

Arbitration by Agreement

Arbitration is a course often provided for in commercial contracts. The complexity of contracts means that disputes are likely to arise as to the duties of the parties to each other. Foreseeing this, they agree to refer matters, either in specified areas, or in any matter related to the contract, to an arbitrator. This agreement will be binding on the parties; if a dispute does arise, none of the parties can then ignore the arbitration clause and go to law. The only matters that can be referred to arbitration are those that can be settled by the payment of money from one side to another. (This differs from alternative dispute resolution: see Other Arbitrations, below.)

III

Appointment of Arbitrators

The appointment of the arbitrator is often seen as significant to the outcome of the dispute. It is not uncommon for two arbitrators to be appointed to decide the matter, and either they, or the parties by agreement, appoint an umpire in case the arbitrators disagree. Equally common is for the arbitrator to be appointed by agreement between the parties. This is not as difficult as it may appear, since there are registers of arbitrators, both general and in specialized fields; the parties have a duty to negotiate reasonably in making the appointment, which is enforceable at law. Arbitrators may be full-time specialists, or people with other jobs; many arbitrators are lawyers who specialize in the field of commerce which is the subject of arbitration.

IV

Procedure

An arbitration should be judicial; that is to say, the arbitrator must apply the law of the land to the dispute. The clause in the contract which provides for arbitration may also specify which country’s law is to be applied. The arbitration will generally be phrased in the contract as dealing with matters arising under the contract, or out of the contract; the latter phrase allows the arbitration to deal with things that are not actually in the contract, but which occurred in the circumstances of carrying it out. The only legal prohibition on what the arbitration may consider is whether the contract itself is binding on either of the parties. That is an issue that can only be decided by a court, since the contract is the source of the arbitrator's jurisdiction. The procedure of hearing the case, or deciding it on written statements, is usually less formal than a court hearing. An arbitration is generally enforceable in the same way as a court judgment.