Arbitration as a method of resolving disputes
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1) Arbitration is a formal process where a private third party arbitrator makes a binding decision to resolve disputes instead of going through litigation. 2) It has been used internationally since the late 19th century to resolve conflicts between countries in a private manner. 3) Arbitration results in a final ruling, unlike mediation which facilitates negotiations, and the rulings can be enforced globally through treaties like the 1958 New York Convention.
![conciliation rather than for arbitration.8 Arbitration treaties were negotiated after the war, but attracted much less attention than the negotiation mechanism created by the League of Nations.
By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are: The Geneva Protocol of 1923 The Geneva Convention of 1927 [1] The European Convention of 1961 The Washington Convention of 1965 (governing settlement of international investment disputes) The UNCITRAL Model Law (providing a model for a national law of arbitration) The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration) It is often easier to enforce arbitration awards in a foreign country than court judgments. Under the New York Convention 1958, an award issued a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defenses. Only foreign arbitration awards are enforcemed pursuant to the New York Convention. An arbitral decision is foreign where the award was made in a state other than the state of recognition or where foreign procedural law was used.9
Certain international conventions exist in relation to the enforcement of awards against states. The Washington Convention 1965 relates to settlement of investment disputes between states and citizens of other countries. The Convention created the International Centre for Settlement of Investment Disputes (or ICSID). Compared to other arbitration institutions, relatively few awards have been rendered under ICSID.10 The Algiers Declaration of 1981 established the Iran-US Claims Tribunal to adjudicate claims of American corporations and individuals in relation to expropriated property 8 Genevieve Forbes Herrick; John Origen Herrick (1925, reprinted2005). The Life of William Jennings Bryan. Kessinger Publishing. p. 280.
9 Article 1 of the 1958 New York Convention. 10 Tupman, "Case Studies in the Jurisdiction of the International Centre for Settlement of Investment Disputes" (1986) 35 ICLQ 813](https://image.slidesharecdn.com/arbitrationasamethodofresolvingdisputes-140919095112-phpapp02/85/Arbitration-as-a-method-of-resolving-disputes-4-320.jpg)
![during the Islamic revolution in Iran in 1979. The tribunal has not been a notable success, and has even been held by an English court to be void under its own governing law.11
HOW DOES ARBITRATION DIFFER FROM OTHER DISPUTE RESOLUTION PROCESSES?
In mediation, the mediator has no power to render a decision – it is simply facilitated negotiation. In case evaluation, the opinion of the case evaluator is non-binding and therefore will result in a resolution of the matter only if both parties find the opinion persuasive.12
It is essential to draw a firm distinction between Arbitration and Mediation or Conciliation, which are both sometimes characterized as forms of ADR (Alternative Dispute Resolution). In countries where mediation is new or struggling to be introduced as a concept, this association has given rise to the misleading impression that mediation is a form of non- binding arbitration, with the arbitrator proposing or suggesting outcomes based on an assessment of the parties' rights. In fact, arbitration and mediation or conciliation are fundamentally different: the former is a binding determination of legal rights, the latter two forms of dispute resolution involve facilitated negotiation which aims at producing a consensual settlement.13 The one leads to a binding determination (arbitration), the other only in the event the parties agree to settle their dispute on mutually satisfactory terms (mediation).
Arbitration is the preferred final method for resolving commercial disputes if:
1. the parties want privacy
2. they do not share the same legal jurisdiction
3. the nature of the dispute is specialised
4. one or both parties want swift resolution of the dispute.14
ADVANTAGES OF ARBITRATION: 11 Dallal v Bank Mellat [1986] 1 QB 441
12 Boston Law Collaborative, LLC; http://www.bostonlawcollaborative.com/blc//faqs/about-arbitration-and- other-methods-of-dispute-resolution.html#sthash.6FKrVy6l.dpuf 13 Gary B. Born, International Commercial Arbitration, 235-236 (2009); Nigel Blackaby, Constantine Partasides, Alan Redfern, J. Martin & H. Hunter, Redfern And Hunter On International Arbitration 1-75 (2009
14 Chartered Institute of Arbitrators; http://www.ciarb.org/dispute-resolution/resolving-a-dispute/arbitration](https://image.slidesharecdn.com/arbitrationasamethodofresolvingdisputes-140919095112-phpapp02/85/Arbitration-as-a-method-of-resolving-disputes-5-320.jpg)
Arbitration as a method of resolving disputes
- 1. ARBITRATION AS A METHOD OF RESOLVING DISPUTES ISHAAN P. SAVLA SYBLS, LLB A043.
- 2. WHAT IS ARBITRATION? Arbitration is a formal process similar to litigation but where the hearing is in private in front of a nominated third party, the arbitrator, who makes a binding decision. The arbitrator is not a court judge but rather an industry-specific expert or otherwise a well-qualified individual who both parties agree is suitable for resolving their dispute.1 A formal mechanism to resolve disputes between parties, widely used in the securities industry when conflicts appear between brokers and clients, and in the insurance industry when disputes arise between insureds and insurers. The results of arbitration are considered to be final and binding on parties choosing to participate.2 Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. The parties to a dispute refer it to arbitration by one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), and agree to be bound by the arbitration decision (the "award"). A third party reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.3 Arbitration is a form of adjudication which is generally private and less formal than litigation in court. The decision maker is usually an individual or panel of three individuals selected by the parties or a neutral agency. In some cases, involving three arbitrators, each party selects an arbitrator and those two arbitrators select the third jointly. In most arbitrations, the parties agree that the result is binding and therefore enforceable, if necessary, in court.4 Any method of resolving disputes other than by litigation. Abbreviated as ADR. Public courts may be asked to review the validity of ADR methods, but they will rarely overturn ADR decisions and awards if the disputing parties formed a valid contract to abide by them. Arbitration and mediation are the two major forms of ADR.5 1 Chartered Institute of Arbitrators; http://www.ciarb.org/dispute-resolution/resolving-a-dispute/arbitration 2 Black’s Law Dictionary. 3 Sullivan, arthur; Steven M. Sheffrin (2003). [http://www.pearsonschool.com/index.cfm, Economics: Principles in action 4 Boston Law Collaborative, LLC; http://www.bostonlawcollaborative.com/blc//faqs/about-arbitration-and- other-methods-of-dispute-resolution.html#sthash.6FKrVy6l.dpuf 5 Cornell University Law School; http://www.law.cornell.edu/wex/alternative_dispute_resolution
- 3. Gandhiji once said: “I realised that the true function of a lawyer was to ubnite parties… A large part of my time during the 20 years of my practice as a lawyer was occupied in bringing about private compromise of hundreds of cases. I lost nothung thereby – not even money, certainly not my soul.” HISTORY OF ARBITRATION. The United States and Great Britain were pioneers in the use of arbitration to resolve their differences. It was first used in the Jay Treaty of 1795, and played a major role in theAlabama Claims case of 1872 whereby major tensions regarding British support for the Confederacy during the American Civil War were resolved. At the First International Conference of American States in 1890, a plan for systematic arbitration was developed, but not excepted. The Hague Peace Conference of 1899, saw the major world powers agreed to a system of arbitration and the creation of a Permanent Court of Arbitration. President William Howard Taft was a major advocate. One important use came in the Newfoundland fisheries dispute between the United States and Britain in 1910. In 1911 the United States signed arbitration treaties with France and Britain.6 Arbitration was widely discussed among diplomats and elites in the 1890-1914 era. The 1895 dispute between the United States and Britain over Venezuela was peacefully resolved through arbitration. Both nations realized that a mechanism was desirable to avoid possible future conflicts. The Olney-Pauncefote Treaty of 1897 was a proposed treaty between the United States and Britain in 1897 that required arbitration of major disputes. The treaty was rejected by the U.S. Senate and never went into effect.7 American Secretary of State William Jennings Bryan (1913-1915) worked energetically to promote international arbitration agreements, but his efforts were frustrated by the outbreak of World War I. Bryan negotiated 28 treaties that promised arbitration of disputes before war broke out between the signatory countries and the United States. He made several attempts to negotiate a treaty with Germany, but ultimately was never able to succeed. The agreements, known officially as "Treaties for the Advancement of Peace," set up procedures for 6 John P. Campbell, "Taft, Roosevelt, and the Arbitration Treaties of 1911," Journal of American History (1966) 7 Nelson M. Blake, "The Olney-Pauncefote Treaty of 1897,"American Historical Review, (1945).
- 4. conciliation rather than for arbitration.8 Arbitration treaties were negotiated after the war, but attracted much less attention than the negotiation mechanism created by the League of Nations. By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are: The Geneva Protocol of 1923 The Geneva Convention of 1927 [1] The European Convention of 1961 The Washington Convention of 1965 (governing settlement of international investment disputes) The UNCITRAL Model Law (providing a model for a national law of arbitration) The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration) It is often easier to enforce arbitration awards in a foreign country than court judgments. Under the New York Convention 1958, an award issued a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defenses. Only foreign arbitration awards are enforcemed pursuant to the New York Convention. An arbitral decision is foreign where the award was made in a state other than the state of recognition or where foreign procedural law was used.9 Certain international conventions exist in relation to the enforcement of awards against states. The Washington Convention 1965 relates to settlement of investment disputes between states and citizens of other countries. The Convention created the International Centre for Settlement of Investment Disputes (or ICSID). Compared to other arbitration institutions, relatively few awards have been rendered under ICSID.10 The Algiers Declaration of 1981 established the Iran-US Claims Tribunal to adjudicate claims of American corporations and individuals in relation to expropriated property 8 Genevieve Forbes Herrick; John Origen Herrick (1925, reprinted2005). The Life of William Jennings Bryan. Kessinger Publishing. p. 280. 9 Article 1 of the 1958 New York Convention. 10 Tupman, "Case Studies in the Jurisdiction of the International Centre for Settlement of Investment Disputes" (1986) 35 ICLQ 813
- 5. during the Islamic revolution in Iran in 1979. The tribunal has not been a notable success, and has even been held by an English court to be void under its own governing law.11 HOW DOES ARBITRATION DIFFER FROM OTHER DISPUTE RESOLUTION PROCESSES? In mediation, the mediator has no power to render a decision – it is simply facilitated negotiation. In case evaluation, the opinion of the case evaluator is non-binding and therefore will result in a resolution of the matter only if both parties find the opinion persuasive.12 It is essential to draw a firm distinction between Arbitration and Mediation or Conciliation, which are both sometimes characterized as forms of ADR (Alternative Dispute Resolution). In countries where mediation is new or struggling to be introduced as a concept, this association has given rise to the misleading impression that mediation is a form of non- binding arbitration, with the arbitrator proposing or suggesting outcomes based on an assessment of the parties' rights. In fact, arbitration and mediation or conciliation are fundamentally different: the former is a binding determination of legal rights, the latter two forms of dispute resolution involve facilitated negotiation which aims at producing a consensual settlement.13 The one leads to a binding determination (arbitration), the other only in the event the parties agree to settle their dispute on mutually satisfactory terms (mediation). Arbitration is the preferred final method for resolving commercial disputes if: 1. the parties want privacy 2. they do not share the same legal jurisdiction 3. the nature of the dispute is specialised 4. one or both parties want swift resolution of the dispute.14 ADVANTAGES OF ARBITRATION: 11 Dallal v Bank Mellat [1986] 1 QB 441 12 Boston Law Collaborative, LLC; http://www.bostonlawcollaborative.com/blc//faqs/about-arbitration-and- other-methods-of-dispute-resolution.html#sthash.6FKrVy6l.dpuf 13 Gary B. Born, International Commercial Arbitration, 235-236 (2009); Nigel Blackaby, Constantine Partasides, Alan Redfern, J. Martin & H. Hunter, Redfern And Hunter On International Arbitration 1-75 (2009 14 Chartered Institute of Arbitrators; http://www.ciarb.org/dispute-resolution/resolving-a-dispute/arbitration
- 6. The parties can choose who is to be their arbitrator and this means they can choose a person with the particular expertise involved in their dispute. The arbitral process is private and confidential to the parties and the arbitrator. An arbitration may be held anywhere that is convenient, at any suitable time. Arbitration is flexible. Its procedure can be tailored to a particular dispute to make the best use of time whilst still ensuring a proper consideration of the matters in dispute. Parties are usually free to choose whoever they wish to be their case for them. An arbitrator's award can be enforced over all other dispute resolution methods (except litigation and arbitration) just like a court judgment, provided it followed from a properly written arbitration agreement. Furthermore, it can be enforced in another country, if that country is one of 140 that have adopted the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards.15 Arbitration is often faster than litigation in court. Arbitration can be cheaper and more flexible for businesses. In arbitral proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied. In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability. 15 Chartered Institute of Arbitrators; http://www.ciarb.org/dispute-resolution/resolving-a-dispute/arbitration
- 7. ARBITRATION TODAY: The following states had acceded, ratified or succeeded to the Convention as of 15 February 2013: Afghanistan Albania Algeria Antigua and Barbuda Argentina Armenia Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Benin Bolivia Bosnia and Herzegovina Botswana Brazil Brunei Bulgaria Burkina Faso Cambodia Cameroon Canada Central African Republic Chile China Colombia Cook Islands Costa Rica Côte d’Ivoire Croatia Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Estonia Fiji Finland France Gabon Georgia Germany Ghana Greece Guatemala Guinea Haiti Holy See Honduras Hungary Iceland India Indonesia Iran Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kuwait Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Liechtenstein Lithuania Luxembourg Madagascar Malaysia Mali Malta Marshall Islands Mauritania Mauritius Mexico Monaco Mongolia Montenegro Morocco Mozambique Nepal Netherlands New Zealand Nicaragua Niger Nigeria Norway Oman Pakistan Panama Paraguay Peru Philippines Poland Portugal Qatar Republic of Korea Republic of Moldova Romania Russian Federation Rwanda Saint Vincent and the Grenadines San Marino Sao Tome and Principe
- 8. Saudi Arabia Senegal Serbia Singapore Slovakia Slovenia South Africa Spain Sri Lanka Sweden Switzerland Syria Tajikistan Thailand Trinidad and Tobago Tunisia Turkey Uganda Ukraine United Arab Emirates United Kingdom United Republic of Tanzania United States of America Uruguay Uzbekistan Venezuela Vietnam Zambia Zimbabwe