Frequently Asked Questions About Arbitration

FAQs

1. What is arbitration?

Arbitration is a consensual dispute resolution process where the parties agree to submit their disputes to be finally resolved by an arbitrator, whose award will be binding.

2. How is arbitration different from mediation?

A mediator’s role is to attempt to bring the parties to a mutually accepted settlement. A party is not required to accept terms of settlement proposed in a mediation. A mediation settlement takes effect as an agreement, rather than as an immediately enforceable award.

3. How is arbitration different from expert determination?

Expert determination is commonly used to resolve disputes on a narrow technical issue (such as the value of a company or an asset). As in arbitration, the expert’s finding is usually binding on the parties. An arbitrator’s brief is broader: it is to resolve commercial disputes in accordance with law and commercial practice.

4. How is IEAC arbitration different from litigation?

Arbitration proceedings are conducted in private, rather than in court, and are heard by an arbitrator rather than a judge. Arbitration procedure is generally less formal, and there are no restrictions on who may represent parties in an arbitration.

5. What are the main advantages of IEAC arbitration?

IEAC proceedings have the following main advantages over conventional court proceedings:

a. It is much faster than regular court proceedings, i.e a matter of months not years.

b. It is confidential. The dispute is not a matter of public record.

c. It is neutral. The Rules around Arbitrator selection are designed to ensure that arbitrators are independent, and impartial.

d. It is cheaper. The Rules are set up to reduce each Party’s costs.

e. It is more easily controlled by the parties as it is a private mechanism sponsored by the Parties.

f. Its awards can be enforced internationally more easily than court judgments.

6. Why is arbitration commonly provided for in international contracts?

 Arbitration is particularly appropriate for international disputes because the costs of litigating disputes, especially in foreign countries, is prohibitive for most parties.

7. What are the potential disadvantages of arbitration?

a. Unlike courts, who have the power of the state behind them,

i. Tribunals generally have no power to make orders affecting non-parties to the arbitration agreement.

ii. Tribunals generally do not have power to compel third parties to participate or to do (or to refrain from doing) something.

b. because arbitration is very flexible to the control of parties, without good quality rules and arbitrators or counsel that are not interested in maintaining cost, it can become as expensive as court proceedings. The IEAC rules are designed to foreclose as many of these wasteful procedures as possible.

8. What is “institutional” arbitration?

Institutional arbitration is arbitration administered by an organisation such as the ICC, LCIA or the IEAC, most often under that institution’s rules.

9. What are the advantages of institutional arbitration?

The benefits of institutional arbitration such as IEAC arbitration is that whereas many of the benefits of arbitration, such as speed, cost-control and confidentiality are maintained, the rules are designed to put it place basic minimal constraints that preserve and support the enforceability of arbitral awards that parties receive.

10. Is arbitration cheaper than litigation?

Arbitration will be cheaper than litigation if the parties are focussed on cost control and the rules used prevent procedural abuse. Fortunately, the IEAC Rules attempt exactly that.

11. Is arbitration quicker than litigation?

As above, arbitration will be faster than litigation if the parties are focussed on speed and the rules used prevent procedural abuse. Fortunately, the IEAC Rules attempt exactly that.

12. Are arbitral awards subject to appeal?

Arbitral awards are usually final and not subject to review on the merits. There are limited bases on which to set aside an award or to block the enforcement of an award. Well run arbitrations with properly reasoned, high quality awards, are unlikely to be set aside or blocked.

13. What if I want to have hearings in my arbitration?

If parties wish to have online hearings (or in-person hearings at specific locations), they can make a joint request to the tribunal, or the tribunal can decide on its own that the issues are of sufficient complexity and having hearings is an absolutely necessary component of treating the parties fairly and allowing each party to present its case. If in-person hearings are required, IEAC can arrange facilities and support services for parties at its partner firm locations.

 

14. Does the IEAC specify who can represent a party at arbitrations?

The only restriction the IEAC places on representatives is their good conduct during the arbitration, not on who they are. Thus, a party may choose anyone to represent them in the arbitration, subject to some restrictions once a tribunal has been constituted, to prevent conflicts of interest arising, whether these representatives have legal training or not. The IEAC operates a roster of firms that parties may wish to evaluate for the purposes of representation but that is entirely up to the parties and has no relevance for the arbitration process.

15. Where can I find more information on IEAC arbitration?

The IEAC website, www.expeditedadr.com, contains information relating to the IEAC’s role and administrative services, its arbitration rules, its model arbitration agreements, its panel of arbitrators.

16. What rules govern IEAC arbitration proceedings?

The rules governing an IEAC arbitration are set out in the Rules posted on the website and for the purposes of court support and oversight of arbitrations, is based on the law of the arbitration agreement chosen by the Parties. If no law of the arbitration has been chosen, the arbitration will be governed by the law of France.

17. Why is the law of France the default law of the arbitration?

France is one of the most pro-enforcement legal jurisdictions in the world with consistent support of arbitrations by the French judiciary. In an effort to maximise the enforceability of IEAC awards, the default law of the arbitration in the Rules is designated as the law of France.

18. Why not pick another pro-enforcement jurisdiction as governing law?

The Parties are at liberty to designate another jurisdiction for the purpose of the governing law of the arbitration. However any choice of governing law of the arbitration must be very carefully considered to ensure that the arbitration is not hampered in any way and the resulting award is enforced. The IEAC recommends that default governing law specified in the Rules be preserved.

19. Is it necessary to have an arbitration agreement?

Yes. As arbitration is a consensual process, an arbitrator has no power to determine a dispute unless the parties have agreed to this and the requirements of the arbitration agreement have been complied with. The parties may agree to arbitrate before a dispute arises (most commonly by an arbitration clause in a contract), or after a dispute has arisen.

20. What effect does an arbitration agreement have?

An arbitration agreement provides the basis for an arbitrator’s jurisdiction. An arbitrator will not entertain a request for arbitration in the absence of an arbitration agreement. The parties may also modify or supplement the applicable arbitration rules by express provision in the arbitration agreement.

21. Can an arbitration agreement cover claims in tort, as well as contract?

Yes. An arbitration agreement is usually drafted to include claims arising “out of or in connection with” a particular contract. If the parties choose a particular “seat” for their arbitration agreement, they must ensure that the type of dispute can be settled by arbitration in that place.

22. What happens if a party attempts to litigate a dispute which is covered by an arbitration agreement?

If a party commences court proceedings in a dispute which is covered by a valid arbitration agreement, courts in most countries around the world will stay their proceedings and decline to hear the dispute.

23. What are the requirements of a valid arbitration agreement?

An arbitration agreement should be as clear as possible, i.e. what are the the disputes that will be arbitrated, and what rules will be used. It should also be in writing or evidenced in writing.

24. What matters should be dealt with in an arbitration agreement or arbitration clause that refers to IEAC arbitration?

The preferred option is to use the model clause. Versions in various languages are posted on the website. The IEAC Rules have a number of default options geared towards a low-cost, expedited arbitration. The most important thing is to

a) state clearly that all disputes are subject to arbitration,

b) do not make arbitration conditional on anything else, and

c) make reference to arbitration rules of the International Expedited Arbitration Centre.

Generally, a clear and short arbitration clause is the preferred option so that the vagueness does not work against your intention to arbitrate disputes.

25. Is it necessary to use a prescribed form of arbitration agreement?

No. However, the IEAC has a recommended clause located here.

26. Should an arbitration agreement provide for one or three arbitrators?

There are several factors to be considered. A three-arbitrator tribunal will generally result in higher costs. A three-arbitrator panel is more appropriate for complex or technical disputes, and in cases where the parties are from jurisdictions with different legal systems or commercial customs. Also, the enforceability of an award from a three arbitrator tribunal may be less vulnerable to allegations of partiality.

27. What language should be chosen to conduct the arbitration proceedings in?

You may choose the language of the arbitration In principle, the parties are free to agree to conduct the arbitration in any language they choose. In practice, the parties should consider the languages spoken by the parties, the languages that the agreements and the evidence will likely be in, and the extent to which the choice of language may affect the choice of arbitrators.

28. What if the parties wish to conduct the arbitration in two languages?

With the default approach set out in the IEAC Rules, i.e. a documents-only approach, this is easier than with hearings. However, it is important to realise that accurate translations of all documents will increase your costs of the arbitration. Often, the parties to a contract agree to conduct their arbitration in two languages. This requires every document to be presented in both languages and oral submissions and evidence to be interpreted at the hearing. The requirement to produce (and agree) such translations can add significantly to the cost of the proceedings. It is also possible to hold hearings in multiple languages.

29. What happens if an agreement containing an arbitration clause is found to be invalid?

An arbitration clause is considered to be severable from the rest of the agreement in which it is contained. Thus, even if the agreement containing the clause is found to be invalid, this will not affect a party’s ability to arbitrate disputes.

30. What is the significance of the place or seat of the arbitration?

The place (or the “seat”) of the arbitration will indicate which law and which courts will govern the arbitration as it proceeds towards conclusion. Under the New York Convention, one of the criteria upon which a court may refuse enforcement of an award is if an award has been set aside by a court at the seat applying the arbitration law of the seat.

31. Can hearings be held outside the place of the arbitration?

Depending on the flexibility of the law of the chosen “seat”, physical activity related to the arbitration such as deliberations or hearings may be held in one or more different physical locations. The way the default seat of the  arbitration is set in the rules, allow for a great deal of flexibility for where the arbitrators may make their determinations, or where hearings may be held.

32. Is the governing law of the contract the same as the governing law of the arbitration?

Not necessarily. The governing law of the contract is what, combined with what is stated in the contract, decided what the rights and obligations are of the parties to the contract in relation to each other. The law of arbitration is the law governing how the parties will resolve their disputes. The law of the arbitration will very often be dictated by the seat of the arbitration.

33. What governing law will the Tribunal apply in an IEAC arbitration?

When assessing the rights and obligations of the Parties, the Tribunal in an IEAC arbitration will apply the governing law of the contract, if clearly specified. If not clearly specified, the Tribunal will determine the applicable governing law and then apply it. The procedural rules that the Tribunal will follow will be the IEAC rules supplemented by or restricted by the rules of the seat or place of arbitration.

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