Arbitration is the most popular alternative to litigation. This is because arbitration awards are binding and enforceable.
Other forms of alternative dispute mechanism include negotiation, mediation, conciliation and adjudication. It is possible to tailor these mechanisms to suit an individual contract.
Advantages of arbitration
Arbitration is known to have the following advantages over litigation:
Different types of arbitration
Parties can decide between ad hoc arbitration or institutional arbitration that has procedural rules in place.
The London Court of International Arbitration (LCIA) is one of the world’s leading arbitration institutions. Most parties that choose the LCIA elect to have London as their seat, regardless of whether UK parties are involved. The LCIA administers arbitration under any system of law. Commencing an LCIA arbitration involves the payment of a nominal commencement fee, with the Secretariat’s and arbitrators’ fees being charged on an hourly basis thereafter.
The International Court of the International Chamber of Commerce (ICC) is the largest arbitration institution with a presence in 86 countries. Paris and London are the most popular seats for hearings. As with the LCIA, the ICC has its own set of arbitration rules. However, unlike the LCIA, charges are not on an hourly basis. The charges are a percentage of the sum in dispute and can be substantial for a claimant initiating the arbitration.
Other institutional arbitration bodies include the Chartered Institute of Arbitrators, the Royal Institution of Chartered Surveyors and the ICSID, which is an institution affiliated to the World Bank.
While institutional arbitration has ready-made rules that govern arbitration proceedings, ad hoc arbitration is less formal and arbitration is conducted on terms to be agreed between the parties. Terms can be imposed by a third party if the parties fail to reach a consensus on procedure. A good compromise for parties choosing ad hoc arbitration is to adopt the UNCITRAL Rules (United Nations Commission on International Trade Law).
It is easier for the parties to have agreed the type of arbitration in advance, rather than trying to agree upon a procedure once the dispute has arisen. LCIA’s recommended clause for mediation and arbitration is:
‘In the event of a dispute arising out of or relating to this contract…, and if the dispute cannot be settled through negotiation, the parties shall first seek settlement of that dispute by mediation in accordance with the […] Mediation Procedure…
If the dispute is not settled by mediation within [ ] days of the appointment of the mediator, or such further period as the parties shall agree in writing, the dispute shall be referred to and finally resolved by arbitration under the […] Arbitration Rules…’
It is also good practice for the arbitration clause to state the seat of arbitration, the number of arbitrators and the governing law.
An arbitration agreement must be in writing and can be a clause within an agreement. The clause itself forms a self-contained contract and will not be deemed to be invalid even if the remaining agreement is.
Why choose London as a seat for arbitration?
London is a major international legal centre and more international and commercial arbitrations take place in London than in any other city in the world. This is because:
Can a court interfere in arbitration?
Arbitration normally excludes the jurisdiction of national courts. A party to an arbitration agreement against whom legal proceedings are brought may apply to the relevant national court to stay any court proceedings brought in breach of an arbitration agreement. On application, the court must grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. The court also has inherent jurisdiction to stay proceedings brought in breach of an arbitration agreement.
A court does, however, have certain powers of interference in spite of an arbitration agreement. A court has power to extend time limits, appoint and remove arbitrators, determine disputes as to jurisdiction and questions of law, order third party disclosure, secure the attendance of witnesses and make orders in urgent cases before the commencement of the arbitration.
Appeals from arbitration awards
Arbitration awards are generally final and not subject to appeal. A party wanting to appeal must establish that:
Enforceability of arbitration awards
It is easier to enforce an arbitration award than it is to enforce a judgment of a foreign court. The UN Convention on Recognition and Enforcement of Foreign Arbitral Awards (better known as the New York Convention 1958) provides an efficient regime of enforceability of arbitration agreements and awards in 148 countries.
There is a general obligation for the contracting states to presume the validity of arbitration awards, recognise them as binding and enforce them in accordance with their rules of procedure. A party seeking enforcement of a foreign award needs to lodge with the court (a) the arbitral award and (b) the arbitration agreement.
The party against whom enforcement is sought can object to the enforcement by submitting proof that:
The court may on its own initiative refuse enforcement for reasons of public policy. However, the intention is that enforcement should be by way of proceedings no more onerous than if proceedings had commenced and the award had been made in that particular contracting state. The formalities to enforce the award should be minimal.
Fladgate’s arbitration expertise
Fladgate’s Dispute Resolution team has an impressive track record in relation to international arbitration, having acted in a wide range of disputes for international companies both in the UK and abroad, with particular expertise in construction/engineering disputes, commodities disputes, IP and sports disputes and trust disputes. We adopt a pragmatic, hands on approach and the involvement of partners in this technically complex area ensures that clients receive the best possible advice.
The team is experienced in conducting arbitrations under many international arbitration rules, as well as ad hoc arbitrations, including:
We have acted for clients in many jurisdictions including the US, India, Thailand, the EU and the Middle East. Given our significant international dimension, we are experienced in supporting overseas based clients and their legal advisers who are conducting arbitration proceedings in London.
Simon Ekins, Partner, Fladgate LLP
 If the parties fail to agree, the arbitrators determine the manner in which the arbitration is conducted. If the arbitration is before the LCIA, they will apply the law(s) or rules of law which they consider appropriate (Article 22 of the LCIA Arbitration Rules 1998). If it is an ad hoc arbitration, the law will be determined by the conflict of laws rules which the tribunal considers applicable (section 46 of the (English) Arbitration Act 1996).