What sorts of arbitration varieties do you know? What is the role of arbitrator to you? Should arbitrator as a general rule be required to be impartial and or independent parties?


Introduction

Arbitration is a well-established and generally used means to end disputes. It is one of numerous kinds of Alternative Dispute Resolution. It provides parties to a controversy with a choice other than litigation. [1]

Unlike litigation, arbitration takes place out of court: the two sides select an impartial third party, known as an arbitrator; agree in advance to comply with the arbitrator’s award; and then participate in a hearing at which both sides can present evidence and testimony. The arbitrator’s decision is usually final, and courts rarely reexamine it.[2]

What is Arbitration?

Arbitration is a type of alternative dispute resolution (ADR). Actually, it is a legal method for the resolution of disputes outside the courts, where the parties to an argument refer it to one or more persons by whose decision they agree to be bound.[3]

Alternative Dispute Resolution (ADR) is consist of dispute resolution procedures and techniques. These techniques act as a ways for disagreeing parties to approach to an agreement short of litigation.[4]  Basically ADR is a substitute to a formal court hearing or lawsuit. It is a combined term for the ways that parties can reconcile disputes, with or without the help of a third party. ADR are ways and methods of determining disputes outside the trial processes.[5]

 Arbitration is a declaration method in which a third party reviews the case and imposes a decision that is legally binding for both sides.

Arbitration is frequently used for the resolution of commercial disputes. Particularly, it is used   in the context of international commercial transactions. [6]

The use of arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts.[7]

Arbitration can be either voluntary or mandatory .It can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable.[8]

HISTORY OF ARBITRATION

Arbitration is a very older method of fixing arguments between people and even disputes

between different nations.[9]  There are several forms of arbitration. Commercial arbitration is a very old and much relied upon apply of dispute resolution between national and international companies and corporations.  [10]

 In the United States unionized sector, studies have shown that the number of collective bargaining agreements that include arbitration clauses as a way of dispute resolution In fact, by 1944 the Bureau of Labor Statistics showed that 73% of all labor contracts in America contained arbitration clauses and by the early 1980’s that figure had grown to 95%. Today, 98% of all collective bargaining agreements in the United States contain arbitration clauses.[11]  Arbitration as a means of dispute resolution has not only been a preferred method by business and labor but has also been supported by the federal government for over a century.

 An example of governmental support for arbitration can be found in the Interstate Commerce Act, passed in 1887, which had a voluntary arbitration clause for workers in the Railroad industry.[12]

No one knows exactly when arbitration got started but it was long before the twentieth

Century as many workers wrongly believe. King Solomon was an arbitrator. Philip the

Second, the father of Alexander the Great, used arbitration as a means to settle territorial

disputes arriving from a peace treaty he had negotiated with the southern states of Greece

as far back as 337 B.C.[13]

 In England, arbitration is older than the common law system, which  United States courts later inherited. In fact, England used arbitration as a common means of commercial dispute resolution as far back as 1224.[14]

The United Mine Workers of America (UMWA) developed a grievance arbitration type clause that was adopted by the delegates and placed into its constitution at the UMWA’s founding convention in 1890.[15]

Types of arbitration:

There are two types of Arbitration:

  1. Voluntary Arbitration
  2.  Compulsory Arbitration[16]

Voluntary Arbitration is a binding, adversarial dispute resolution process in which the disputing parties choose one or more arbitrators to hear their dispute and to render a final decision or award after an expedited hearing.

Voluntary arbitration implies that the two contending parties, unable to compromise their differences by themselves or with the help of mediator or conciliator, agree to submit the conflict/ dispute to an impartial authority, whose decisions they are ready to accept. In other words, under voluntary arbitration the parties to the dispute can and do they refer voluntarily and dispute to arbitration before it is referred for adjudication. This type of reference is known as “voluntary reference”, for the parties themselves volunteer to come to a settlement though an arbitration machinery.[17]

The vital elements in voluntary arbitration are:

§ The voluntary submission of dispute to an arbitrator.
§ The subsequent attendance of witnesses and investigations.
§ The enforcement of an award may not be necessary and binding because there is no compulsion.
§ Voluntary arbitration may be specially needed for disputes arising under agreements.

Compulsory Arbitration is a non-binding, adversarial dispute resolution process in which one or more arbitrators hear arguments, weigh evidence and issue a non-binding judgment on the merits after an expedited hearing. The arbitrator’s decision addresses only the disputed legal issues and applies legal standards. Either party may reject the ruling and request a trial de novo in court.

Compulsory arbitration is one where the parties are required to accept arbitration without any willingness on their part. When one of the parties to an industrial dispute feels aggrieved by an act of the other, it may apply to the appropriate government to refer the dispute to adjudication machinery. Such reference of a dispute is known as “compulsory” or “involuntary” reference, because reference in such circumstances does not depend on the sweet will of either the contending parties or any party to the dispute. It is entirely the discretion of the appropriate govt. based on the question of existing dispute, or on the apprehension that industrial dispute will emerge in particular establishment.[18]

Under compulsory arbitration, the parties are forced to arbitration by the state when:

§ The parties fail to arrive at a settlement by a voluntary method
§ When there is a national emergency which requires that the wheels of production should not be obstructed by frequent work-stoppages
§ The country is passing through a grave economic crisis
§ There is a grave public dissatisfaction with the existing industrial relations
§ Public interest and the working conditions have to be safeguarded and regulated by the state.[19]

Who is Arbitrator?

An ‘arbitrator” is an unbiased third party who intervenes disputes between parties[20]. He tries to appear at an impartial considerate between them. He takes the facts and circumstances of both sides.

 Any one of legal age and of sound mind and one not convicted or declared insolvent and one not specifically banned to perform by any court order can be an arbitrator. The basis of an arbitrator’s right comes from the parties to the argument being arbitrated. Both parties agree that their argument will be resolved through arbitration rather than in court.[21]

Role of arbitrator

One of the features distinguishing arbitration from litigation is the fact that the parties are free to choose their own tribunal. That tribunal will preside over the proceedings and will ultimately produce an award which is final and binding on the parties. Although there are many factors for the parties to consider when selecting arbitrators, it is generally accepted that they should be independent and impartial. A lack of independence may form the basis of a challenge and disqualification of a party’s arbitrator, and so must be guarded against from the outset.

The general rule in international arbitration is for there to be:

  • one or three arbitrators;
  • if one, and the parties cannot agree on who it should be, the arbitrator is chosen by the relevant arbitration institution;
  • if three, each party nominates an arbitrator subject to confirmation by the relevant arbitration institution. The third is chosen by the institution or by the two party-nominated arbitrators, unless the parties agree otherwise.[22]

This is reflected in the ICC, LCIA and UNCITRAL Arbitration Rules.

At the time of drafting their arbitration agreement the parties will need to decide whether they require one or three arbitrators to decide any dispute arising out of the contract or whether they will remain silent on the issue. The option to remain silent will, to a large degree, depend on whether the arbitration clause incorporates a set of institutional rules which provide a default position.

The appropriateness of a sole arbitrator or panel will often turn on the nature, value and complexity of the specific dispute between the parties and so prescribing the number or arbitrators may well not be suitable. The following factors should be borne in mind when deciding the number of tribunal members:

  • The amount in dispute;
  • The need for speed;
  • cost effectiveness – more arbitrators means more costs;
  • The complexity of the case – does it warrant a three-member tribunal?[23]

In the event that the parties wish to specify that a sole arbitrator will determine any disputes arising out of their contract, the parties can determine the identity of the arbitrator by specifying the name of that arbitrator. The perceived advantage to having an individual specified in the arbitration clause is that there is certainty at the outset as to who will determine and disputes arising out of the contract, however as the parties cannot foresee the range of disputes that might arise they cannot be sure that that individual will ultimately be appropriate. This risk perhaps outweighs the advantage of certainty, so specifying the mechanism for appointment rather than the individual to be appointed may be more appropriate.

Arbitrator as a general rule should be required to be impartial and or independent of the parties.

The arbitrator has given legal advice or provided an expert opinion on the dispute party or an affiliate of one of the parties. The arbitrator has previous involvement in the case. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that privately held. A party shall inform an arbitrator, the Arbitral Tribunal, the other parties and the arbitration institution or other appointing authority (if any) about any direct or indirect relationship between it (or another company of the same group of companies)and the arbitrator. The party shall do so on its own initiative before the beginning of the proceeding or as soon as it becomes aware of such relationship. In order to comply with General Standard, a party shall provide any information already available to it and shall perform a reasonable search of publicly available information. An arbitrator is under a duty to make reasonable enquiries to investigate any potential conflict of interest, as well as any facts or circumstances that may cause his or her impartiality or independence to be questioned. Failure to disclose a potential conflict is not excused by lack of knowledge if the arbitrator makes no reasonable attempt to investigate.[24]

 

Conclusion:

Every business or other areas of human endeavor has some or the other kind of disputes in various spheres, To resolve these disputes parties will often seek an amicable resolution of whatever gripe they maybe harboring. And as a result the role of third parties in assisting to resolve contentious issues becomes a pertinent one which requires careful and balanced handling, and in many cases arbitration is used as a settlement technique that involves third party input – it takes a resolute decision that is legally binding for the quarrelsome parties. Mediation is another form of alternative dispute resolution (ADR) in which a settlement negotiation is strengthened by a third party leading to a non-binding resolution unlike with arbitration that can be likened to litigation in courts. Arbitration is utilized by the cases involving Commercial disputes and this is usually the case with international commercial transactions. Consumer and employees cases often witness mandatory arbitration by virtue of the fine print contracts, and as a consequence this translates to the denial of the right to access the courts as individuals. As far as advantages are concerned, arbitration takes over judicial proceedings in that expert arbitratorare called upon whenever a case pertains to highly technical issues, arbitration usually takes less time compared to litigation in court, and can be much cheaper and flexible. [25]Proceedings in arbitration matters can be confidential unlike most cases, and disadvantages are that due to ancillary agreements on the ambiguity of the small print in the agreements. Consumers and employees often find themselves in a situation where they lack prior knowledge when purchasing a product or taking a job covered by mandatory arbitration which limits on rights to access courts of law. Other major drawback of this practice is that the recovery of attorney’s fees is unavailable and avenues of appeal are also very limited.

Reference

  • Crowley, Thomas. 1994. “The Art of Arbitration Advocacy.” Hawaii Bar Journal (September)
  • Culiner, Helen. 1994. “Practical Guidelines for Lawyers Representing Clients in Arbitration Proceedings Today.” Dispute Resolution Journal (September).
  • Sullivan, arthur; Steven M. Sheffrin (2003). [http://www.pearsonschool.com/index.cfm locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4 Economics: Principles in action]. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 324. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm? locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4
  • Nolan-Haley, Jacqueline M. 2001. Alternative Dispute Resolution in a Nutshell. 2d ed. St. Paul, Minn.: West Wadsworth
  • Ware, Stephen J. 2001. Alternative Dispute Resolution. St. Paul, Minn.: West Wadsworth
  • Information World Mediation WikiMediation
  • http://legal-dictionary.thefreedictionary.com/arbitration
  • Deye, James, and Lesly Britton. 1994. “Arbitration by the American Arbitration Association.” North Dakota Law Review (spring)
  • Elkouri & Elkouri, “How Arbitration Works,” Fifth Edition. 1999
  • Kellor, Frances. “American Arbitration: Its History, Functions and Achievements.”
    • 2001.
    • Stern, James L., Najita, Joyce M., “Labor Arbitration under Fire.” 1997.
    • Hill, Marvin F., Sinicropi, Anthony V., “Improving the Arbitration Process: A
      • Primer for Advocates.” 1991.
      • Bales, Richard C. “Compulsory Arbitration: The Grand Experiment in
        • Employment.” 1997.
        • Hill, Marvin F., Sinicropi, Anthony V., “Improving the Arbitration Process: A
          • Primer for Advocates.” 1991.
          • Bonasso, Russell F., “Fire in The Hole.” 2003
          • http://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp
          • h ttp://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp
          • http://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp
          • http://www.sooperarticles.com/law-articles/criminal-law-articles/role-arbitration-dispute-resolution-26557.html
  • ICDR International Arbitration Rules (ICDR Rules), available at www.adr.org/.
  • AAA-ABA Code of Ethics for Arbitrators in Commercial Disputes (AAA/ ABA Code).

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[1] Crowley, Thomas. 1994. “The Art of Arbitration Advocacy.” Hawaii Bar Journal (September)

[2] Culiner, Helen. 1994. “Practical Guidelines for Lawyers Representing Clients in Arbitration Proceedings Today.” Dispute Resolution Journal (September).

[3] Sullivan, arthur; Steven M. Sheffrin (2003). [http://www.pearsonschool.com/index.cfm locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4 Economics: Principles in action]. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 324. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm? locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4

[4] Nolan-Haley, Jacqueline M. 2001. Alternative Dispute Resolution in a Nutshell. 2d ed. St. Paul, Minn.: West Wadsworth

[5] Ware, Stephen J. 2001. Alternative Dispute Resolution. St. Paul, Minn.: West Wadsworth

[6] Information World Mediation WikiMediation

 

[7] http://legal-dictionary.thefreedictionary.com/arbitration

[8] Deye, James, and Lesly Britton. 1994. “Arbitration by the American Arbitration Association.” North Dakota Law Review (spring)

[9] Elkouri & Elkouri, “How Arbitration Works,” Fifth Edition. 1999

[10] Kellor, Frances. “American Arbitration: Its History, Functions and Achievements.”

2001.

[11] (4) Stern, James L., Najita, Joyce M., “Labor Arbitration under Fire.” 1997.

[12] Hill, Marvin F., Sinicropi, Anthony V., “Improving the Arbitration Process: A

Primer for Advocates.” 1991.

[13] Bales, Richard C. “Compulsory Arbitration: The Grand Experiment in

Employment.” 1997.

[14] Hill, Marvin F., Sinicropi, Anthony V., “Improving the Arbitration Process: A

Primer for Advocates.” 1991.

[15] Bonasso, Russell F., “Fire in The Hole.” 2003

[16] http://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp

[17]h ttp://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp

[18] ttp://www.lawyersclubindia.com/articles/Types-of-Arbitration-and-their-Importance-53.asp

[19] http://www.dst.org.in/kinds-of-arbitration

[20] http://www.thefreedictionary.com/arbitrator

[21] http://wiki.answers.com

[22] ICDR International Arbitration Rules (ICDR Rules), available at www.adr.org/.

[23] AAA-ABA Code of Ethics for Arbitrators in Commercial Disputes (AAA/ ABA Code),

available at www.adr.org/.

 

[24] IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines), pt. I(1),

available at www.ibanet.org/.

[25] AAA-ABA Code of Ethics for Arbitrators in Commercial Disputes (AAA/ ABA Code),