“Arbitrations should not apply the law in the same strict was that a judge does”


Introduction

“For an arbitrator goes by the equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power for equity.”

– Aristotle

Through his quote, Aristotle has clearly defined the paramount role that arbitration plays in seeking justice. As a prevailing authority, arbitration fills the gaps where litigation falters, especially where time and money are concerned.

With the soaring global cost of civil litigation, more and more businesses are opting for a varied range of dispute resolution strategies. As a cost effective and expeditious approach guaranteed by law, arbitration has become a popular dispute resolution alternative for conflicting parties.

Parties have a greater degree of freedom over the proceedings and unlike judges; arbitrators come from a variety of professions and trades. A far cry from the harsh publicity surrounding court hearings, arbitral proceedings allows parties to resolve their disputes privately and in confidence.

Once an arbitration proceeding is complete and an award has been issued, that is the end of the matter. Parties do not have to suffer the repercussions of further appeal proceedings based on the merit of the award.

 

Arbitration

Arbitral tribunals usually take less time than national courts to reach a final decision. Litigation may take anything between five to fifteen years to resolve a dispute, sometimes even longer.

Arbitration proceedings on the other hand may be completed even within three to six months (In fast track arbitration, hearing may be conducted on daily basis). Further, even Arbitrators can make interim awards.

The relative speed of arbitration compared with litigation keeps lawyers’ costs down. Parties generally pay less in the long run for arbitration than if they take their case to national courts. This is more so in cases of institutions/organizations/corporations which are prone to litigation.

The arbitration proceedings respect your privacy. In contrast with ordinary courtroom proceedings under public and media gaze, Arbitration Tribunals do not divulge details of an arbitration case and keep the identities of the parties completely confidential. This protects large corporations against negative publicity, which they might attract irrespective of whether they win or lose in litigation. This also avoids the disclosure of trade secrets and potentially embarrassing information.

In our country, an order made by an arbitration tribunal has the force of a decree. Thus, it can be executed in the same manner in which a court decree can be executed. The result is binding and not opens to appeal as litigation is.

A known evil is always better than an unknown one. In arbitration proceedings parties can choose their arbitrator, whereas they cannot choose their judge in litigation. Thus, in arbitration proceedings they can rest assured of the temperament of the arbitrator whereas they are totally at the mercy of “Judge”. Further the chosen arbitrator can be an expert in the topic in dispute, which a judge seldom is. This makes arbitration especially useful in complex, technical commercial disputes.

The speed of arbitration and the informality of the process, couples with a less-confrontational discovery process minimize and allows the parties to quickly get on with their lives.

Rules of Civil Procedure do not apply to the arbitration proceedings thereby making them non formal and flexible. The parties are at liberty as far as presentation of their case is concerned. They can proceed even without a lawyer and present their case in their own language according to their own convenience. Arbitration proceedings are neither bound to court rooms nor court timings. Thus, providing the flexibility which cannot be provided by traditional method of dispute resolution.

The Arbitrators are not bound by precedent and have great leeway in such matters as: active participation in the proceedings, accepting evidence, questioning witnesses, and deciding appropriate remedies. Arbitrators may visit sites outside the hearing room, call expert witnesses, seek out additional evidence, decide whether or not the parties may be represented by legal counsel and perform many other actions not normally within the purview of a Court. It is this great flexibility of action which combined with the costs and prompt delivery of justice usually far below those of traditional litigation makes Arbitration so attractive.

Arbitrators have wide latitude in crafting remedies in the arbitral decision with the only real limitation being that they may not exceed the limits of their authority in their award. An example of exceeding arbitral authority might be awarding one party to a dispute the personal automobile of the other party when the dispute concerns the specific performance of a business- related contract.

It is open to the parties to restrict the possible awards that the arbitrator can make. If this restriction requires a straight choice between the position of one party or the position of the other, then it is known as PENDULUM Arbitration or FINAL OFFER ARBITRATION. It is designed to encourage the parties to moderate their initial positions so as to make it more likely they receive a favorable decision.

To ensure effective arbitration and to increase the general credibility of the arbitral process, arbitrators will sometimes sit as a panel usually consisting of three arbitrators. Often the three consist of an expert in the legal area within which the dispute falls (such as contract law in the case of a dispute over the terms and conditions of a contract), an expert in the industry within which the dispute falls (such as the construction industry, in the case of a dispute between a homeowner and his general contractor) and an experienced arbitrator.

Arbitration Law in Bangladesh

Bangladesh has recently enacted the Arbitration Act 2001 (the Act). It came into force on 10 April 2001, repealing the Arbitration (Protocol and Convention) Act 1937 and the Arbitration Act 1940, legacies of the British Raj in India. The new Act was again amended in 2004 in certain respects. Such legislative steps were urgent in the face of increasing foreign investment in Bangladesh in various sectors, especially in natural gas and power, and the ever-growing export trade with the rest of the world. The Act, consolidates the law relating to both domestic and international commercial arbitration. It thus creates a single and unified legal regime for arbitration in Bangladesh. This modernization gives Bangladesh a facelift as an attractive place for dispute resolution in the field of international trade, commerce and investment. Although the new Act is principally based on the UNCITRAL Model Law, it is a patchwork quilt as some unique provisions are derived from the Indian Arbitration and Conciliation Act 1996 and some from the English Arbitration Act 1996.[1]

The new Bangladesh legal regime on arbitration has embraced such fundamental tenets of modernization as party autonomy; minimal judicial intervention; independence of the tribunal; fair, expeditious and economical resolution of disputes; and effective enforcement of awards. This has also been brought about in domestic arbitration. Although the new Act is principally based on the Model Law, it has introduced the improvements highlighted above. In many respects the Act allows more freedom to the parties than the Model Law. As the Act is only just over four years old, it is premature to express any judgment on its efficacy as an arbitral legal regime and the impact it will have in the future for Bangladesh as a place for settlement of international commercial and investment disputes by arbitration. Certainly Bangladesh, as a prospective destination for increasing foreign investment in the future, has made a positive step in the right direction by enacting the new law. Bangladesh, like its sub-continental counterparts, has a long tradition of settlement of disputes by alternative methods a phenomenon that has pervaded the social fabric for centuries. But it can still improve its international arbitral legal regime by incorporating, as appropriate, lessons from other jurisdictions in its efforts towards modernization and internationalization of arbitration. No doubt there is still room for improvement in the Act itself.

It has to be appreciated that for making Bangladesh an attractive place for her much needed foreign investment for economic growth and development and for alternative dispute resolution (i.e. ADR), it is not enough to enact a new law on arbitration only, the Government has to go a long way to achieve the stated purpose. Bangladesh needs more than a mere piece of legislation on arbitration at the present time. The Government, the judiciary as well as the legal profession must take initiatives and make constant efforts towards the development of legal infrastructure and institution building in the field of alternative dispute resolution including arbitration.

Arbitration proceedings are neutral. In litigation, parties are confronted by a lack of choice and most of the time, are forced to use the national courts at hand to settle their disputes. Furthermore, due to the absence of a truly international court for the resolution of transnational commercial disputes, cases are usually instituted in the courts of the state where either the claimant or the defendant resides. On the other hand, arbitration offers the possibility of a completely neutral panel of adjudicators. This, in turn, eliminates the possibility of actual or perceived bias on the part of the court.

Neutrality is derived from the flexibility surrounding the conduct of arbitration proceedings. For example, parties have a right to choose, where they would like to conduct their arbitration proceedings, in what language and by arbitrators of which nationality. This flexibility generally ensures a neutral structure for arbitration proceedings, whereby neither party has an undue advantage over the other.

Arbitration is faster than litigation in court. Overburdened and congested national courts unnecessarily elongate the length of time required to resolve a dispute. Once a party has entered the litigation process they will find themselves involved in unavoidable time-consuming stages starting from the first Court of Instance, through to the Court of Cassation in order to come to a final judgment.

Parties in commercial disputes cannot afford to wait; they will need to resolve their disputes in the fastest manner they find suitable. In arbitration, parties can control the process. Results can be produced within a time frame that has been set by the parties themselves.

Arbitration guarantees privacy to the extent parties wish it to be. Parties can avoid public exposure of sensitive business and financial information and negative publicity often associated with litigation. This implies that the parties are able to then continue to have a relationship – even a working business relationship – after the dispute has been resolved.

Arbitration is inexpensive in comparison to litigation. Even with complex international cases, it is more cost-effective to arbitrate rather than litigate. Through its informal approach to resolving a dispute, arbitration cuts out the need for numerous litigation stages and formalities, which cuts down on unnecessary expenses.

Conclusion

Arbitration is a form of alternative dispute resolution in which the two parties agree not to take their dispute to court, but instead to resolve the dispute by hiring an arbitrator to hear both sides. The arbitration process is shorter than litigation because many of the procedures of evidence are not included. The decision of the arbitrator is final and no appeal to the arbitrator’s decision is possible. Many consumers, franchise, employment, and other business contracts include an arbitration clause; some of these clauses require mandatory arbitration.

Advocates of arbitration claim that it has these benefits over litigation (going to court):

  • The speed and informality of the process and its low cost, comparative to civil litigation, and
  • The control the parties have over the selection of the arbitrator.

On the other hand, those who argue against using arbitration cite these issues:

  • The lack of a formal evidence process, which means you are relying on the skill and experience of the arbitrator to sort out the evidence, rather than a judge or jury. No interrogatories or depositions are taken, and no discovery process is included in arbitration.
  • The lack of a formal appeals process, and the (usually) binding nature of the process. If you are a party to a binding arbitration and you want to protest the decision of the arbitrator, you may not be able to do so unless there is some reason to believe the arbitrator acted with malice or was biased.

If you are considering putting an arbitration clause in a contract, or if you are faced with having to sign a contract with an arbitration clause, consider these benefits and drawbacks in making your decision about whether to arbitrate.

 

 

 

 

 

 

References

  1. Alternative dispute resolution. Retrieved November 26, 2011, from

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  1. 2.     ALTERNATIVE DISPUTE RESOLUTION PRACTITIONERS GUIDE.

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  1. Arbitration Law in Bangladesh. Retrieved November 26, 2011, from

http://www.vakilno1.com/saarclaw/bangladesh/arbitrationlaw/arbitration_law_in_bangladesh.htm

  1. Bangladesh. Retrieved November 26, 2011, from

http://baseswiki.org/en/Bangladesh

  1. Kamal, M. (n.d.) ADR IN BANGLADESH. Retrieved November 26, 2011,

from http://rru.worldbank.org/Documents/Toolkits/adr/adr_appendices.pdf

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afterthoughts. Retrieved November 26, 2011, from http://www.thedailystar.net/law/2005/10/03/index.htm

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Retrieved November 26, 2011, from http://www.thefinancialexpress-bd.com/more.php?news_id=91513


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  1. Maniruzzaman, A. F. M. (n.d.) The new arbitration act and some

afterthoughts. Retrieved November 26, 2011, from http://www.thedailystar.net/law/2005/10/03/index.htm