Arbitraion Tips

Arbitration Tips

Arbitration or litigation?

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Arbitration Tips Arbitration or litigation?

Which is best? This is an age-old question. Should you put an arbitration clause in your contract? And, if so, what sort of arbitration clause?

In summary, there will never be a correct answer that applies to all circumstances. There is no straightforward solution and one size most definitely does not fit all.

Even setting ultimate priorities is difficult. Do you simply want all potential disputes resolved quickly, effectively and economically? Or do you want to maximise commercial advantage using available dispute resolution mechanisms as one means to this end?

For present purposes, “litigation” is understood to encompass the system of courts provided by the state as part of a default mechanism to avoid citizens taking the law into their own hands. “Arbitration” is essentially, and simplistically, a contractually-based dispute resolution system whereby the parties accept privatised decision making, albeit supported by relevant national jurisdictions.

Richard Harrison Partner richard.harrison@laytons.com +44 (0)20 7842 8000

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Arbitration Tips | Arbitration or litigation?

Whether to include an arbitration clause In simplistic terms, the relevant factors are:

Enforceability

wide-ranging and burdensome. However, sometimes the prescriptive force of the rules enables considerable forensic advantage.

Expertise It is possible to select an arbitral tribunal which has a

This can be crucial and determinative. In an international

combination of relevant industry expertise and judicial

transaction, where the counterparty might be in a different

experience. Judges in the Court system can be foisted on you.

jurisdiction, there are better prospects of enforcing an

Notwithstanding that in the higher courts they are usually

arbitration award under the New York Convention than using

pretty good.

reciprocal enforcement provisions applicable to national court judgments.

Privacy

Finality and certainty There is an argument often made that an arbitration award is final and binding and not susceptible to an appeal.

General speaking, Court judgments are reported, adverse judicial comment is made public and the dirty water drips

This may be the case although:

publically from the soiled linen. Arbitration is essentially a private process

Cost In an arbitration, the fees of the arbitrator and the costs of the arbitration venue must be added to the cost of lawyers. Yet it

a.

there is an irreducible point at which English court will review awards within the scope of their jurisdiction and

b. the appeal process in the litigation system is subject to considerable safeguards and filters.

is still possible for an efficiently conducted arbitration to turn

Availability of summary judgment

out cheaper than obstructively managed court proceedings

This may be seen as an advantage of the court system .There

Speed

may be an opportunity to short-circuit the process by arguing that the other party has no reasonable prospect of success.

It is possible for an arbitration to run smoothly and

As against this it might be argued that a swift and efficient

exceptionally quickly. The lower courts in England are run

arbitral proceeding may be more effective than a long drawn

down and their resources pared to the bone. The Business

out summary judgment application.

and Property Courts can have lengthy waits for hearings.

But, equally, there is a scope for delay in arbitrations and the

Conclusion on the eternal question

courts can be surprisingly efficient.

As stated above, there is no right answer. It very much

Flexibility of procedure In theory it is possible for a skilled arbitrator and competent representatives to design and implement swift and efficient procedures designed around the requirements of the specific dispute. The Civil Procedure Rules are highly prescriptive and increasingly complex. Disclosure of documents can be

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depends on the parties, the circumstances, and the nature of the potential disputes.

Arbitration Tips | Arbitration or litigation?

What sort of arbitration clause This demands equally careful consideration of the same factors but consider: •

Incorporating institutional rules – but get the title of the institution right and consider its appropriateness

•

Prescribing the qualifications and experience of the potential arbitrators

•

Specifying the “seat” of the arbitration along with the governing law. This will avoid collateral and potentially time consuming disputes.

•

Some provisional agreement over the scope of disclosure of documentsSophisticated escalation provisions – disputes panels of senior executives, mediation or some other form of “alternative dispute resolution” procedure as a condition precedent to arbitration – may be beneficial but they need careful drafting to retain the mandatory nature of the arbitration agreement itself and to avoid limitation problems.

Conclusion As well as there being no right answer, much depends on trying to predict the nature of potential disputes and your commercial priorities in the future. So there is also no easy answer.

As ever, taking early legal advice is always worthwhile.

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Arbitration Tips | Arbitration or litigation?

Arbitration Our team is experienced in resolving disputes through arbitration and committed to providing outcomes-focused, innovative and commercially minded advice to guide our clients through all stages of the arbitration process.

We represent clients from across the globe in arbitrations involving a range of sectors including construction, international trade and commodities, investment treaties and shipping.

Our experience spans arbitrations convened through the main international institutions such as the ICC, LCIA, LMAA, DIFC and SIAC as well as on an ad-hoc basis.

Our Team John Abbott

Russell Beard

Partner john.abbott@laytons.com +44 (0)20 7842 8000

Partner russell.beard@laytons.com +44 (0)20 7842 8000

Robert Clark

Simon Foster

Partner robert.clark@laytons.com +44 (0)20 7842 8000

Partner simon.foster@laytons.com +44 (0)1483 407 000

Richard Harrison

Paddy Kelly

Partner richard.harrison@laytons.com +44 (0)20 7842 8000

Partner paddy.kelly@laytons.com +44 (0)20 7842 8000

Rebekah Parker

Will Slater

Partner rebekah.parker@laytons.com +44 (0)20 7842 8000

Consultant will.slater@laytons.com +44 (0)20 7842 8000

Geraint Thomas

Ben Thorogood

Partner geraint.thomas@laytons.com +44 (0)20 7842 8000

Solicitor ben.thorogood@laytons.com +44 (0)20 7842 8000

Daniel Walter Solicitor daniel.walter@laytons.com +44 (0)20 7842 8000

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This information is offered on the basis that it is a general guide only and not a substitute for legal advice.

We cannot accept any responsibility for any liabilities of any kind incurred in reliance on this information.

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