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Obligations of Arbitration.

Posted on 20/06/2016 · Posted in Arbitration

Arbitration is an alternative form of dispute resolution to litigation, a formal and binding process where a final judgement is made by an independent arbitrator. Arbitration is often chosen over litigation as a faster, more flexible and cost effective route to resolving disputes both within the UK and internationally.

Arbitration is often referred to as the ‘businessman’s method of resolving disputes because it has become an increasingly popular way of resolving disputes in today’s modern arena, however, it is worth remembering that arbitration in fact dates as far back as Aristotle and Ancient Greece, whose ethics still influence modern day thinking.

Equity is justice in that it goes beyond the written law. And it is equitable to prefer arbitration to the law court, for the arbitrator keeps equity in view, whereas the judge looks only to the law, and the reason why arbitrators were appointed was that equity might prevail”
Aristotle

As arbitration increasingly becomes an integral part of the judicial system, the right ethical conduct is more important than ever in ensuring a fair and effective outcome, and is the responsibility of everyone involved in the arbitration process, from the arbitrator to legal representatives to the disputing parties themselves. By adhering to a set of obligations or ethics, the interests of all participants are safeguarded, and both the arbitration process and outcome are more likely to remain time and cost effective, confidential and fair.

But what are these obligations? As such a key player in the arbitration proceedings, it is crucial that an arbitrator must be entirely impartial, fair and trustworthy. If an arbitrator believes that he or she cannot remain impartial they must withdraw from the case. Arbitrators will usually be experts in business and finance and throughout their careers have developed ties to companies that are likely to require arbitration at some stage. In these cases arbitrators must be aware that in a court of law, should previous contact become known, an aggrieved party may use such evidence to appeal an arbitrator’s decision. To avoid this, arbitrators must only accept cases in which they have no vested or prior interest.

Arbitrators are also bound by confidentiality, a key component of any arbitration proceeding. It is not only the arbitrator who must understand and adhere to certain obligations, but also the disputing parties. All participants must understand what obligations they and the other party will be under, including those of confidentiality, document disclosure or process agreements.

The arbitration process is a flexible one, however it generally takes the following format:

  1. The arbitration begins with the arbitration clause. Many commercial contracts will now include a clause that refers a dispute (should it arise) to adjudication such as: ‘Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration’.
  2. Statement of claims: the arbitrator is chosen based on their experience or expertise and the demands of the aggrieved party are made.
  3. Statement of counterclaims: the opposing party responds. The aims of this stage are to identify the issues and avoid any surprises that may arise in the hearing.
  4. Discovery: collection of evidence by both parties. An arbitrator may have determined a date by which all evidence must be submitted to ensure the process is as streamlined as it promises to be.
  5. Trial: usually an oral hearing accompanied by written evidence.
  6. Award: the award is made with the arbitrator’s final decision usually accompanied by an explanation of their reasoning.

As the decision made by the arbitrator is generally binding and difficult to appeal against it is of the utmost importance that both parties are clear of the terms of their arbitration before embarking on the process. It is the duty of the arbitrator to ensure that all parties are well informed. Should a party require a great deal of written evidence to substantiate their claims they should ensure that the arbitration clause permits substantial document collection in the discovery stage.

The issue of confidentiality may explain why arbitration has been so successful as a form of dispute resolution. In many commercial cases, trade secrets may be involved and, as such, arbitration offers greater opportunity for businesses to continue functioning as normal once the conflict is over. English law upholds this position with regards to confidentiality by decreeing that the parties involved in arbitration, including the arbitrator and the tribunal, have a duty to maintain confidentiality throughout the arbitration, even without this duty being explicitly agreed. To this end, Article 30 of the London Court of International Arbitration (LCIA) Rules 2014 contains express provisions imposing obligations of confidentiality. To be absolutely certain that confidentiality is upheld, however, one must clearly outline this in the arbitration clause. Third party members who have only been summoned for evidence and are not more widely implicated in the dispute may need to sign separate confidentiality agreements.

These obligations and ethics set a crucial standard that helps arbitration to continue to be one of the most popular forms of modern day dispute resolutions and ensures that those who practise it do so to the highest standards.

Expert Evidence is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

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Disclaimer – Please confirm any of the above views with your solicitor. Expert Evidence takes no responsibility or provides any guarantee that the views above are correct for your particular case or jurisdiction.