Arbitration is an Alternative Dispute Resolution mechanism meant to either resolve the disputes between two conflicting parties or to find remedies for the suffering party through a favouring award.
Arbitration has a lot of advantages and thereby often preferred by contracting parties. Some of the advantages include-
- Confidentiality of the dispute
- Parties can choose the seat and venue of the arbitration
- Less expensive method than litigation
- Less hostile environment
- Parties can choose the arbitrator and the number of arbitrator
- Easy enforcement of award
- Award can be challenged only on limited grounds
- Easy rules related to evidence and discovery
- Less time consuming process
There are majorly two kinds of arbitration- Ad Hoc Arbitration and Institutional Arbitration.
Ad Hoc Arbitration-
In simple terms ‘Ad Hoc’ means something done for a particular specific purpose only. In terms of arbitration, the parties have full discretion to decide the entire procedure and aspect of the arbitration.
This includes deciding,
- The number of arbitrators,
- The arbitrators appointed,
- The amount of fees and expenses to be given,
- The applicable rules that shall govern the arbitration,
- The time within which the proceedings shall be completed
Ad Hoc Arbitration is therefore seen as a more flexible and easy procedure as the parties conduct the arbitration themselves. They have the freedom to design the entire proceedings.
While there are certain advantages of this method, there are certain disadvantages as well. Including-
- Parties limited knowledge of this area of law
- Parties in dispute often find it difficult to cooperate with each other
- The arbitrators have to act beyond the duties of that of arbitration. This basically means that they also have to manage the proceedings.
- If the procedures are not well-managed, extra time would be required making the procedure slower.
- Possible in-transparency of rules
- Due to the above stated reasons, courts intervention would be required
Institutional Arbitration-
By the term ‘institutional’ it is clear that a superior or specialised body will play a major role in the arbitration. Unlike Ad Hoc arbitration, the parties here do not have full freedom to decide the procedure of arbitration. Some of the institutions are-
- Singapore International Arbitration Centre
- London Court of International Arbitration
- ICC International Court of Arbitration
- Hong Kong International Arbitration Centre
The institution decides,
- The set of rules to be applied,
- Procedure of the arbitration,
- Constant supervision of the proceedings,
- Calculation of fees and expenses,
- Appointment of arbitrators on request,
- Management of proceedings,
- Reviewal of award before passing the final award
As the parties here cannot intervene and decide upon the matters stated above, there can be certain disadvantages as well-
- The proceedings can be more expensive
- Time consuming due to constant check of rules laid by the institution
- Rigid procedure
- Parties will have to act and respond as per the orders of the institution
Also read- How is Seat of Arbitration different from Venue of Arbitration
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