But today, despite the fact that you do not enter into a contract with the intention of having disputes, you can add an arbitration clause when you sign said contract which will ensure that if any dispute arose it will be resolved by the rules set by the arbitration court of your choosing by one or more arbitrators appointed by said court. By agreeing to accept an arbitrator’s ruling, both parties may feel more comfortable keeping the contract once the matter has been resolved.
A typical arbitration will include the following steps:
1. The claimant requests the arbitration.
The claimant must prepare a statement of claims which is a summary of the dispute in question. This claim should include the specific demands, supporting evidence, a copy of the arbitration clause under which the dispute is to be settled; and appoint one or more arbitrators chosen depending on their reliability or expertise in the particular field in which the conflict is taking place.
2. Respondent’s answer, which will indicate any counterclaims to be made.
After the second party receives the statement of claims, the respondent has the opportunity to answer briefly stating any counterclaims and jurisdictional objections on such claims and appoint a second arbitrator.
An additional step may apply here if the claimant has any reply to the Counterclaim.
3. Appointment of the tribunal.
The length of the arbitration can take about 12 to 18 months from the initial claim to the final hearing. In some cases, it could be shorter or longer depending on:
- The procedures adopted
- Exchange of pre-hearing submissions
- The availability of the tribunal
- Disclosure of the documents relied upon
- Exchange of witness statements, sometimes followed by rebuttal statements
- Exchange of expert reports, sometimes followed by rebuttal reports
- Hearing
- Post-hearing submissions
- Award
4. Award
Once the arbitral tribunal deems the case to have reached arguments, evidence and discussion to the extent of being sufficient for material resolution, the arbitral tribunal issues an award. The arbitral tribunal may decide a separate issue or part of the dispute in a separate award. The award is not appealable, meaning that said award is final and binding for both parties.
5. Enforcement
By agreeing to the arbitration, the parties undertake to carry out any award without delay. The claimant is entitled to refer it to an enforcement officer to ascertain its execution as per the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards in New York on 10 June 1958.
Things to consider when adding an arbitration agreement to a contract:
- The parties might wish to include a provision for them to attempt an ADR (Alternative Dispute Resolution) procedure, such as mediation, prior to commencing as to avoid arbitration. If this is included in the initial contract, parties may suggest mediation without worrying about seeming weak and in this case both parties might be more willing to settle. There are several organizations that will assist parties with ADR procedures such as Centre for Effective Dispute Resolution (CEDR) in London and The Center for Public Resources based in the US.
- Parties sometimes might want to add an Option Clause for one or more parties to choose from referring to an arbitration tribunal or court in case of a dispute. This should be considered under very careful analysis because in some cases due to local laws, adding the option of court might over-rule the arbitration provision when the preference is just one-sided.
- Some laws require governmental entities to obtain parliamentary or other approval before executing an arbitration agreement; therefore the capacity to sign said agreement should be carefully checked beforehand.
- The parties should sensibly decide which disputes should be referred to arbitration. Generally, clauses are drafted very broadly so as to cover all disputes which might arise between the parties. However, sometimes parties might want to resolve matters by other means and some disputes might not be resolved through arbitration under an applicable law. Therefore careful drafting of categories under which the disputes fall under and the provision to resolve them is advised.