Arbitration is a procedure that has increased in popularity over the years, owing to its potential to resolve business disputes. International caseloads are on the rise by something in the ballpark of nine percent every year. Arbitrators are deciding cases that are worth billions of dollars. As a result, the process of arbitration is a cheaper option and faster than litigation.
Added to that, there are other benefits of arbitration, such as finality, shorter timelines, and privacy. An arbitrator or the arbitration panel as a whole has to abide by the operative law, and they might seek more considerable latitude. However, there are some disadvantages, as well. Get to know the basics before you opt for arbitration.
Time is a significant aspect. Theoretically speaking, the process of arbitration is more fast-paced than litigation. However, if you look at reality, there are a few elements of elements that are time-consuming.
In litigation, on the other hand, judges tend to set time limits on discovery. Trials happen over a specific time. Arbitration continues per the schedules of the arbitrators as well as the disputing parties.
An oral discovery procedure might or might not be considered, the phase of document production is pretty much integral. If the arbitration agreement allows it, the parties in arbitration can easily increase the duration of the proceedings.
This will happen by extensively engaging experts and witnesses at the hearing and participating in cross-examination of the witnesses from the side of the other party. Hence, you have to carefully take into account the evidence that you will be furnishing to present your case. This requires a lot of time. In such a scenario, the arbitrators put a time limit on proceedings that one has to maintain religiously.
Arbitration, in reality, is nothing but a white elephant. Expensive, but have many drawbacks. There is a widespread perception that litigation is more costly than arbitration. However, the reverse is true. Arbitrators do not work in a way identical to that of the judges in civil courts. They are not bound by the same rules too. They have the discretion to allow any testimony or evidence of interest to the disputing parties.
Aside from that, there is no time limit in arbitration proceedings. The concept of court time doesn’t exist, nor is there any schedule imposed by the court. Coming to complex international cases, you might have to go through extended hearings in distant jurisdictions. That would require you to call upon your witnesses from another location and fly them in. If the arbitration panel suggests, there might also be numerous starts and stops owing to scheduling conflicts. Plus, an expensive fee is also a matter of concern. All in all, much money goes into the arbitration process.
Choosing An Arbitrator
The arbitration clause underlines the process of choosing a presiding arbitrator. In a typical situation, both sides specify requisite qualifications for selecting an arbitrator or decide together during the negotiations in the pre-arbitration phase.
Mostly, the choice of an arbitrator varies based on the nature of the dispute. If it is only a case of accounting question, an arbitrator with proper finance or accounting experience might fit in. For disputes over business value as well as financial losses occurring due to contract breaches or intellectual property infringements, valuation experts are the ones who might preside over the arbitration proceedings. Retired judges have experience and efficiency in conducting a hearing process. They can deal better with legal issues as well as non-legal determinations.
How Many Arbitrators?
Taking this decision might prove to be critical. If you consider the factors like speed and cost, a single arbitrator is the best fit, undoubtedly. However, in case the questions are a bit complicated and require expertise in several aspects. In such a case, a panel with three arbitrators might be ideal. You must always keep in mind that almost the entire decision-making process is behind closed doors. The arbitration clause will lay out the specifications regarding when and how the individuals will have to take up the responsibility of decision-making.
Arbitration has certain advantages if you compare it to litigation. However, the entire process requires excellent foresight and planning. The disputing parties must consider the different trade-offs between arbitration and court litigation.