Arbitration.

Arbitration is a form of dispute resolution, where parties agree to appoint an independent decision-maker (known as the arbitrator) or group or decision-makers (a tribunal) to decide on the outcome of their dispute, instead of a judge in court.

As with judgments in court, decisions made by an arbitrator or tribunal are binding and enforceable, including internationally. Functionally, arbitrators perform a similar role to a judge, managing both the arbitration process, reviewing evidence, and passing a judgment.

Arbitration is often chosen because the process is private, flexible and specialist-led, while avoiding some of the lengthy waiting typically associated to conventional litigation through the courts.

These 3 processes are distinct:

Court: a public process run to strict court timetables and procedures where a judge oversees the case.

Mediation: a confidential negotiation assisted by a mediator; the mediator doesn’t decide who is right or wrong and outcomes may not be binding.

Arbitration: a private process where the arbitrator makes a binding decision, also known as an ‘award’, usually after reviewing evidence and hearing submissions.

International arbitration involves parties, assets, contracts and events connected to more than one country. In the UK, this could include:

• a UK business in dispute with an overseas supplier or investor
• a contract governed by foreign law, or performed abroad
• parties based in different jurisdictions
• assets located in another country

In matters arbitrated internationally, parties must agree

• a neutral seat, or location of arbitration
• a set of agreed rules or an institution to administer the case
• an arbitrator or tribunal with the right expertise for the industry and region

Awards made during arbitration can often be enforced internationally through the New York Convention, making arbitration a practical solution where judgments may be difficult to enforce internationally.

Arbitration is normally chosen in situations where speed, confidentiality and neutrality are prioritised.

Certain industries, such as construction, are more likely to settle disputes through arbitration due to technical knowledge that a general judge may lack, while international disputes between either countries or private business are often arbitrated as the process can be held in a neutral country or location, while still delivering an internationally enforceable result.

However, arbitration isn’t always suitable. Where urgent injunctions or protective orders are required, courts may still provide a more suitable avenue, while disputes involving third parties may not result in them being bound to the outcome through arbitration.

Lastly, where the law itself may be out of date, open to interpretation or need updating, court may be preferable as it provides an easier route to appeal than arbitration.

We can advise on whether arbitration or a more appropriate litigation route is suitable for your dispute.

Arbitration costs depend on the value and complexity of the dispute, with 5 key factors affecting fees:

• Legal representation fees
• The arbitrator or tribunal’s fee
• Venue and administrative costs
• Fees for experts and specialist evidence
• Interpreter and translation costs (if appropriate)

In terms of recoverability, costs in arbitration tend to follow the event, which means the unsuccessful party may be ordered to pay a significant proportion of the other side’s costs. However, while this is common, it’s not guaranteed and conduct can affect the outcome.