What is Arbitration?

Arbitration is perhaps the oldest method of resolution of disputes still in common use. Arbitration begins with an agreement, made either when a contract is made, or after a dispute has arisen, that certain matters which are or may be in contention between the two parties will be resolved by submitting them to arbitration and not (at least in the first instance) to the courts; and that the parties will honour the valid award of the arbitrator in respect of matters referred to him in accordance with that arbitration agreement. Should a party fail to honour the award, the other party may still seek relief from the courts.

The Arbitrator is an independent, impartial but knowledgable neutral, jointly appointed by the parties, who pay his fees and expenses. The arbitration is held in private, at a time and place to suit the parties, and the public and press are not admitted; however, some writers have suggested that this might change as various human rights statutes take effect.

Arbitration is practised, in one form or another, in nearly every country of the world, and frequently in the resolution of disputes between countries. Most countries have their own Arbitration Act, Ordinance or similar, and over 30 countries have adopted the UNCITRAL Model Law, promulgated by the United Nations Commission on International Trade Law in 1985.

In the United Kingdom, Scotland follows the Model Law, but England, Wales and Northern Ireland have a new, custom-built Arbitration Act 1996, which sets out in great detail and in clear, simple English, the ground rules for the conduct of arbitration in those countries. Section 1 of the Act is worth quoting for its clear statement of the objectives of Arbitration:

  1. the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
  2. the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
  3. in matters governed by [this Act] the Court should not intervene except as provided by [this Act].

Here is a full transcript of the Arbitration Act 1996.

Not all disputes can be settled by arbitration. Many will be familiar with the story of King Solomon and the two women claiming a baby, and his ingenious solution (1 Kings 3, vv 18 - 28). Nowadays, such custody disputes are reserved to national courts such as the Family Court, and cannot be the subject of an arbitration. Arbitration is designed for civil disputes, and has no application to criminal matters. An arbitrator is limited in the relief he can order in his award - generally the payment of money or the rectification of a contract. He cannot subpoena witnesses or send anyone to prison.

While in theory anyone can be an arbitrator, in practice the parties are unlikely to appoint anyone who does not possess high levels of skills and experience, both in his/her original profession or trade, and in the specialised skills of arbitration. In most countries there are Institutes or Associations of Arbitrators dedicated to maintaining the levels of training of people practising as arbitrators. The best known is perhaps the Chartered Institute of Arbitrators, based in London, but having members all over the world.

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