Turner Arbitration Chambers

Modes of Dispute Resolution^*

Arbitration: is a consensual procedure for the settlement of disputes under which the parties agree to be bound by the decision of an arbitrator whose decision is final and legally binding on both parties.

Arbitration is generally governed by domestic legislation. An increasing number of countries are basing their law on the United Nations Commission on International Trade Law, UNCITRAL.

The fact that an arbitrator's award is enforceable in the courts of the 120 or so countries that have ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards make arbitration a unique and attractive alternative to litigation when compared to other means of dispute resolution.

As a form of dispute resolution, arbitration is often preferable to litigation, because the process is completely confidential and generally more flexible, simpler and potentially faster.

Almost any dispute that can be resolved by litigation in the courts can be settled by arbitration. Each jurisdiction has its own rules.

Areas where arbitration has proved especially effective include: building and civil engineering contracts, computer applications, commodities, the engineering industry, finance, imports and exports, insurance, manufacturing, partnership disputes, the process industry, rent review clauses in commercial leases, shipping, telecommunications and the travel industry. Arbitration is also widely used in the resolution of international commercial disputes.

Alternative Dispute Resolution: Increasingly disputes are being settled by what has become known as alternative dispute resolution (ADR).

ADR procedures are essentially non-binding in character and the procedures are intended to encourage a spirit of co-operation and party participation in resolving disputes. It encourages the parties to address the wider issues between them and not just the legal merits. It recognises the cost of losing law suits as well as the cost of winning and seeks to encourage disputing parties to consider other options to redress their differences in the anticipation that to do so will offer opportunities for mutual gain and the opportunity to continue with the business relationship.

ADR includes mediation, conciliation, early neutral evaluation, med-arb and expert determination. 

Mediation and Conciliation share many of the characteristics of arbitration, where parties agree to use a neutral third-party to help solve a dispute on the basis of the technical expertise and experience of the mediator, the difference being that the disputants not the mediator decide the terms of the agreement.

Mediation is not legally binding or enforceable through the courts, although the agreement can be put into a legally binding format. Unless the parties agree to be bound by the decision reached with the mediator, they still have recourse to litigation, or indeed arbitration. 

Early Neutral Evaluation is an opportunity for a judge or other independent neutral to appraise the case and give an assessment of the parties’ chances of success were litigation pursued. It has the advantage of giving both parties a realistic assessment of the costs and potential gains from litigation.

Med-Arb is the name coined for a combination of mediation and arbitration. Mediation is attempted first and if no agreement results, the dispute will go to arbitration where a binding decision will be issued. The process combines the advantages of mediation – in particular allowing the parties to decide the terms of their agreement with the finality of arbitration and seems to be emerging as the preferred ADR method for e-commerce disputes.

Expert Determination: In expert determination, the parties agree to have their dispute resolved by a decision from an independent third-party whose decision will, as a matter of contract, be binding on them. The third-party is usually an expert in the subject matter of the dispute and is chosen jointly by the parties or appointed by an appointing body previously agreed upon the parties. It is a process which is especially suitable for determining the technical aspects of complex disputes but needs to be employed with care in international disputes where enforcement difficulties may undermine the process.

Adjudication: While also used as a generic term for any process where the resolution of a dispute is decided by a third-party, in the UK adjudication is a process introduced into the construction industry to expedite matters where litigation or arbitration is liable to cause expensive contractual delays. Generally, adjudication processes operate within strict timetables and although binding in character, the decisions do not preclude the further arbitration or litigation.

In summary, the key issue in the whole process of dispute resolution is to find the most appropriate method or procedure used singly or in combination to settle each individual dispute.

* Source: Chartered Institute of Arbitrators.