When arbitration is used and why

In almost all instances, arbitration must be contemplated at the contract drafting stage. Parties may, of course, agree to take a dispute to arbitration at any stage, but once a dispute has broken out, positions become polarised, and agreement is accordingly less likely.

The reasons for preferring arbitration clauses to the more usual reference to the courts – in a commercial context – boil down to the so-called “three Es”: expedition, expertise and enforcement.

1. Expedition

To elaborate, one of arbitration’s key strengths is that parties don’t join a waiting list for a trial date and the attention of a judge in interlocutory proceedings. They are free to choose their arbitrator and should do so mindful of availability and disposition to run an efficient procedure. Not only should arbitration run to a tighter timetable than is possible in many courts, but also the final and binding nature of the award eliminates the possibility of a decision being deferred until all appeal routes have been exhausted.

It is worth noting here that the option to incorporate an appeals procedure into the arbitration process exists, which some parties – as an arguable safeguard – choose to use. The convention remains, however, that arbitration is a one-shot process. The risk of the “wrong” result is generally considered an acceptable
trade-off for speed and certainty.

The approach to document disclosure in arbitration is inherently narrower in scope than is commonplace in court: individual rather than classes of documents are identified, and the procedure is not driven by rigid rules.

There are further savings of time in hearings – which tend, consistent with the consensual underpinnings of arbitration, to be less theatrically hostile and bullying than court proceedings – because advocacy is often limited by the so-called Chess Clock Proce