Arbitration is a form of private dispute resolution. The parties involved in the dispute appoint one or more persons – as a rule one or three – who will give a decision on the dispute submitted to them. If parties prefer arbitration, they will have to conclude an arbitration agreement, which will (for the greater part) rule out the matter being decided by the national court. An arbitration agreement may also be formed when parties, either implicitly or explicitly, agree to accept an arbitration clause in the general terms and conditions. There are a number of advantages attached to arbitration, compared with conducting legal proceedings before the national court, but a number of disadvantages should also be mentioned.
The advantages of arbitration
An arbitral award may easily be enforced in the vast majority of countries in the world, something which to a far lesser extent applies, in countries outside the EU, to judgments given by national courts. The simple enforcement of awards is an important advantage of arbitration, particularly in international disputes (outside the EU).
Another advantage may be that a dispute settled by means of arbitration is handled with a far greater degree of confidentiality than a dispute dealt with by the national court. Outsiders, for example, as a rule cannot be aware of the fact that certain parties are involved in arbitration proceedings, nor is it possible for them to attend hearings of the tribunal, unlike in cases dealt with by national courts.
Another advantage of arbitration is that the appointed arbitrators may have special expertise at their disposal, which may be crucial to the dispute submitted to them. An arbitral tribunal that has been asked to hear and determine a takeover dispute may, for example, consist of a registered accountant, an M&A lawyer and a national court judge.
The disadvantages of arbitration
Arbitration may be a time-consuming and expensive way of having a dispute settled. The length of arbitration proceedings in part depends on the persons acting as arbitrators. This is something that will have to be considered by the parties in their choice of arbitrators. Of great importance also to the effectiveness of the procedure is the choice of the place, or legal place, of arbitration.
As a rule the amount in costs a losing party is ordered to pay in arbitration is higher than in cases before the national courts. Obviously this will considerably reduce the costs of a winning party, but the losing party should on the other hand expect having to pay significantly extra costs.
Most arbitration cases are administered by arbitration institutes such as the Nederlands Arbitrage Instituut (NAI), the International Court of Arbitration of the International Chamber of Commerce (ICC)), or one of the many specialist or market segment-oriented arbitration institutes. The link below will provide you with a list of websites of a number of arbitration institutes.
Great deal of freedom in structuring a procedure
Within the limits of the law the parties are free to organize the arbitration proceedings as they see fit. In the vast majority of cases the parties themselves will not draw up all the procedural rules, but they will make a reference to the arbitration regulations. In principle it is permitted to deviate from those regulations.
The legal place of arbitration is determined by the two parties themselves, and if they fail to do so, by the arbitral tribunal. The place of arbitration should be distinguished from the place where the hearings take place, and determines the question by which arbitration laws the proceedings will be governed. If the place of arbitration is in the Netherlands, the Dutch Arbitration Act applies (articles 1020-1073 Dutch Code of Civil Procedure). However, in international arbitration cases in particular specific international rules apply, alongside the arbitration regulations and the applicable laws on arbitration, such as the IBA Rules on the Taking of Evidence in International Arbitration and the IBA Guidelines on Conflicts of Interest in International Arbitration. See also: www.ibanet.org.
A special area of arbitration is international investment arbitration.
Legaltree’s arbitration partners conduct arbitration proceedings both in this country and abroad, as well as arbitration-related procedures before the national courts, such as procedures for the enforcement of arbitral awards, the annulment of arbitral awards, objecting to the appointment of arbitrators, etc. They also act as arbitrators or as secretaries to arbitration tribunals.
These days many of the conflicts are international in character, giving rise to the following questions:
- Before which court or arbitration panel may the conflict be brought?
- Which law is to be applied to the conflict by the court or arbitration panel?
- How will you make sure that the award given is more than just a paper tiger – how, after having obtained a favourable award, will you actually be paid your money and/or be supplied with your goods or services?
Answering these questions and taking legal action over them is what Legaltree has particularly specialized in.
The Legaltree partners have very extensive experience in arbitration. We can assist your undertaking efficiently and effectively, if necessary by setting up a team of lawyers with different specialisms. You will be assured of the best results if our lawyers are approached at a very early stage of a dispute, or potential dispute. At such a moment we will still be able to steer your case into the right direction. Making or creating the correct tactical choices in time increases the chances of avoiding, or being successful in, legal proceedings.
Websites Arbitration bodies
- International Chamber of Commerce (ICC)
- London Court of International Arbitration (LCIA)
- Nederlands Arbitrage Instituut (NAI) (Netherlands Arbitration Institute)
- Raad van Arbitrage voor de Bouw (RvA) (Arbitration board for the building industry)
- Raad van Arbitrage voor de Metaalnijverheid en –Handel (Foundation for the Court of Arbitration for the Metal Trade and Industry)
- Stockholm Chamber of Commerce (SCC)
- Swiss Chambers’ Arbitration Institution
- UNUM (formerly TAMARA)