Arbitration is a term that many people may have heard of but do not properly understand in terms of its breadth and application.
A recent famous example of an arbitration was when Deontay Wilder applied to an arbitrator for an injunction to enforce a rematch clause in his contract with Tyson Fury, with the aim of stopping Mr Fury from fighting Anthony Joshua, before a rematch with Mr Wilder. Mr Wilder’s application was successful, and the pair engaged in a rematch as a result.
But what exactly is arbitration? There is no one correct answer to this question. As explained by Russell Thirgood in the Barton Legal webinar ‘Insight from an Arbitrator and Procurement Law in Construction’ from July 2022 “the user decides the product when it comes to arbitration”.
A key difference between Arbitration and Court proceedings is that parties must agree in the contract if they are willing to arbitrate in the event of a dispute. Whereas, the jurisdiction of the Courts of England and Wales will apply to any dispute in England and Wales, irrespective of whether or not there is a formal contract or agreement between the parties, this is not the case with arbitration.
What about the role of the arbitrator? If we compare an arbitrator to a judge, a judge will always have a legal background, which they have developed over many years of advocating in the Courts, researching the law and interacting within the wider legal profession. An arbitrator may or may not have a legal background; this depends on the nature of the dispute, and the arbitrator the parties have decided to use. However, an arbitrator is just as likely to have a background in a different discipline, for example an engineer or architect. For example, if parties to an NEC4 (Engineering and Construction Contract) nominate the Institution of Civil Engineers as their arbitrator nominating body, it is likely the arbitrator will be a qualified civil engineer. Albeit, this may still be dependent on what the dispute relates to, and whether the arbitrator needs a stronger legal and/or technical background.
The theme with arbitration is, therefore, flexibility, and is aimed at suiting the needs of the dispute to be resolved. This includes the directions/procedural matters of the arbitration. In England and Wales, the Arbitration Act 1996 plainly states, at section 34, that “It shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter”. This carte blanche approach is largely reflected in the rules created by arbitration organisations. For example, section 5 of the Construction Industry Model Arbitration Rules 2016 (‘CIMAR’) states “Subject to these Rules, the arbitrator shall decide all procedure and evidential matters…”. As set out by Russell Thirgood in the webinar, “there is more scope within an arbitral process for something that is more commercial”, this includes allowing the party to agree upon a more practicable and commercial arbitration process. This is in contrast with litigation, which does not allow such flexibility, and where all parties and the Court must abide by the Civil Procedure Rules and the directions laid down by the Court.
Another potential advantage of arbitration is that you can appoint more than one arbitrator. Therefore, if you have a dispute which involves complex civil and mechanical engineering issues, as well as legal issues, you can opt to have a panel of three arbitrators, each with their own expertise in the various areas of dispute. This may incur more costs, but the arbitrators will understand the issues and technical evidence better, and this should produce a better quality of outcome.
Arbitrations also have an advantage over court based litigation, because arbitrators and arbitration organisations are private organisations, which can manage their own caseloads. As they are private organisations and individuals, they also need to be competitive, to ensure those using their services want to re-use them for future disputes, and recommend them to their contacts. Therefore, arbitrators are usually more engaged with the parties, and may respond more quickly and be able to deal with greater technical issues. Following on from this, the parties will develop a rapport with the arbitrator, or will at least know who he or she is. In Court proceedings, it is not unusual that different judges deal with different aspects of the proceedings. One judge may attend one hearing relating to directions, and another judge may oversee and hear the trial. With arbitration, one (or three) arbitrators will act and oversee the whole of the arbitration process. The obvious disadvantage to this is one party may not like the way an arbitrator behaves, or there may be issues of bias. However, arbitration organisations are highly professional and require rigorous training before accepting/admitting anyone as an arbitrator.
An important aspect of arbitration is the power to make orders as to the recoverable costs of the parties and which party should be ordered to pay those costs. Section 61 of the Arbitration Act 1996 provides “The tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties”. The advantage of this is that it encourages parties to act in a way that is reasonable, and to progress the resolution of the dispute. If a party (such as the defendant) acts in a way to frustrate the arbitration proceedings, then they risk, if they are unsuccessful, having a costs order made against them to pay a larger proportion of the successful party’s legal and expert costs. The costs award ability, along with the fact arbitration is generally a more expedited process, gives arbitration an edge over litigation.
Insight from an Arbitrator and Procurement Law in Construction was discussed in our 21 July 2022 webinar with Russell Thirgood of Arbitra International. To view the webinar and detailed notes click here.
In general, arbitration is a complicated process that requires careful consideration. We would always encourage you to obtain legal advice and representation. Barton Legal has the expertise to provide you with initial advice and guide you through an arbitration, in a dedicated and dynamic manner.
To find out how Barton Legal can help you, please click here.