To what extent is an arbitration clause a useful inclusion in contracts

USEFUNESS OF ARBITRATION CLAUSE IN CONTRACTS

The red parts need to have footnotes and be cited excpet for your own ideas and words . The green parts in the bibliography havent been used in the essay . Any resouces used in the bibilography need to have a footnote and used in the body of the essay to show them which parts I used the source

I hope this explains what I want . Feel free to ask me anything furhter

TABLE OF INDEX

1 .INTRODUCTION 3 2 .ANALYSIS 4 3 .CONCLUSION 15

4 .BIBILIOGRAPHY 171 . INTRODUCTION

A process by which parties to the dispute to resolve their civil disputes between themselves or with the assistance of third parties that too without the requirement of ceremonial court hearing , then such process is known as Alternate dispute resolution .[ ADR]

The following are the chief types of ADR that are utilised to resolve the disputes

If third parties are roped in to assist to resolve the disputes between the parties , then such process is known as Arbitration . Assuming the role of a judge , a conciliator is to act in an impartial way and refrain from aligning with either of the parties to the dispute as he is vested with responsibility of resolving the issue impartially . Further arbitration proceeding should be private and free from interference the conditions upon which the settlement are arrived should kept as confidential unless the parties to the dispute decides otherwise

Conciliation or arbitration is the convenient way of resolving the disputes as negotiation takes place directly between the parties to the dispute

If third party or an umpire is roped in to hear the arguments of the either sides of the dispute and to forward his conclusion on the dispute , then such process is known as Arbitration . Under this process both the sides has to agree to employ this process , the arbitrator has the authority to advance his ruling which is legally binding and the parties to the dispute can appeal against the decision of the arbitrator only on limited environment if they are unhappy with the findings of the arbitrator . The arbitration process is entirely private in nature Further , arbitrator is entitled to charge a nominal fee from the parties for the service rendered by him

Arbitral tribunal is an independent body which is more analogues like that of a court and their main duty is to resolve the dispute according to the rules as defined in the respective law . In U .K , there are more than 70 tribunals and each of them is predominantly specializing in particular arena

Both plaintiff and respondent to a dispute mutually agree to place their concerns to a sovereign third party which normally known as the Arbitral tribunal ' which arrives at a conclusion after judging the submissions and evidence placed before it in the same style as a judge would function in a court of law

It is to be remembered that though the arbitration is a substitute to litigation , but it is quite diverse from the various shapes of reconciliation such as alternate dispute resolution [ADR] where parties to a dispute are efficiently engaged in a process of assisted negotiation . In U .K , The Arbitration Act 1996 specifies extra authority to tribunals to redress the grievances including early interim s and cost -capping to payment

This research essay defines what is meant by arbitration , how it is managed and administered and the salient benefits and disadvantages of the same in detail

2 . ANALYSIS

According to The Arbitration Act , 1996 of U .K , the main objects of an arbitration agreement shall contain the following

The main intention of the arbitration should be aimed to obtain a fair settlement of disputes by a neutral tribunal without unwarranted expenses or delay

The parties to the dispute should agree to the style in which they would address the dispute

Such Arbitral agreement should be in writing

Section 34 [2] facilitates the Tribunal to select the procedure to be pursued . The Tribunal is empowered to finalise whether there should be written statements of claim and defence statements , calling the party 's documents for an inspection or for cross-examination . Further , Tribunal is empowered to finalise whether the evidence rules is to be applied or not and whether the Tribunal will initiate any steps to ascertain the veracity of the facts and the law . Further Section 63 [1] permits that the parties to the dispute to decide what portion of the costs of the arbitration that is recoverable from them

There are number of options available , if two parties to a contract have a difference of opinion that necessitates settling under the terms of the contract . Many paradigm forms of contract have a compulsory dispute resolution section that provides for any dispute to be referred to arbitration . Bespoke or boiler plates contracts may have analogous arbitration clauses . Where contract contains provision for arbitration the dispute must be handled by arbitration process . If any application is made to the Court where the contract contains an arbitration clause then the Court will normally refer the action to arbitration . Even when there exists no contractual provision , the parties to a dispute can mutually concur to cite the matter to arbitration

The first and foremost step in the arbitration process is the process where Claimant to deliver a Notice of Arbitration to the other party to the dispute , namely the Respondent . In the ordinary course , the Claimant will in general suggest the name of the Arbitrator . In such scenario , the Respondent can either accept or decline the appointment of the proposed arbitrator . If consensus between the parties cannot be arrived at on that particular individual or any other person , then such situation is known as a fallback position . In the case of fallback position , the party who wants to go ahead with the Arbitration process will request the appointing authority which is described in the Arbitration clause to make the appointment of an arbitrator

For instance , in Scotland , the appointing authorities include the Scottish Council for International Arbitration and other professional institutions as well as the Law Society of Scotland

If there is no provision in the Arbitration clause as to the details of the appointing authority then the parties to the dispute can mutually concur who the appointing authority should be . If no agreement is arrived between the parties , then application will be made to the Court by way of summary application to recommend the appointment of an arbitrator

No sooner Arbitrator has been appointed and has accepted office Arbitration will start immediately . Parties have to concur upon provisos of conditions under which an Arbitrator is equipped to acknowledge the appointment . The Arbitrator may choose to convene an introductory meeting to finalise with routine administrative steps or merely the party who is the Claimant to his Statement of Claim within a stipulated period and for the Respondent , to respond the Statement of Claim within an appropriate period . Such procedure would be proper where it is acknowledged by the Arbitrator and the parties to the dispute that pleadings in writing are apt or necessary

An initial meeting could transact the following administrative points :-

The recognition of the parties to the dispute

The character and nature of the claim

Place of the Arbitration

The rules which are to apply , e .g . U .K Arbitration Act

Whether arbitration proceeding includes a site visit or not

Provisional reliefs , for instance . The safeguarding of evidence or the recuperation of documents and so on

Once the preliminary meeting is over , the Arbitrator will initiate the course of action in motion as per the formulas concurred with the parties , normally by the issuance of directions to the parties or interlocutors

Main advantages of the Arbitration

Privacy : In court room proceedings , it is open to the general public and there is no scope of privacy . In arbitration , proceedings are convened in camera or conducted behind closed doors and secrecy of the proceedings is assured . Arbitration agreements also include a confidentiality clause . Hence , arbitration proceedings assure a certain form of confidentiality towards matter under dispute . Thus , arbitration proceedings , especially in commercial transactions assist to keep the corporate information out of the reach of the competitors and further there is no flash out about the arbitration proceedings in the media headlines . Thus , arbitration proceedings offer complete privacy and confidential towards matter deliberated under arbitration proceedings

Speed : No doubt , arbitration proceedings will be much faster as compared to court proceedings . Generally , arbitration proceedings are to be completed within six months from the time of complaint made . Of course , litigation , on the other hand , can drag on for many years . In arbitration , the neutral third party examines the evidence and reviews documents and then makes a decision that binds both parties . For a commencement of a trial , it may take even a year or two in the case of litigation . Time is the essence of any dispute and despite of the nature of the outcome , if a dispute is resolved with in shortest time possible it will , no doubt , put a potentially divisive issue to rest

Expense : As far as parties to the dispute are concerned , arbitration is less expensive as compared to the court proceedings . Arbitration process does not involve elaborate discovery proceedings that are part of the civil trial proceedings . Further , arbitration proceedings may not involve the employment of legal counsels and as such , there is a substantial savings in legal cost to the parties to the dispute under arbitration . Further , in arbitration of process , only documents to the case and submissions by the parties are taken into consideration for deliberation . Full blown cross examination of witness is being done only in exceptional case and that too , if it only warrants . These simplifications of proceedings will no doubt will result in elimination of unnecessary costs or involve only bare minimum costs as compared to legal expenses incurred in a law suit . Where the complex issues are involved or huge amounts are involved or matter of precedent-setting , it is justified to incur extra cost and to call for a panel of three arbitrators . Arbitration is justified in better way of obtaining a fair and well-reasoned decision

Predictability : Though , it is highly unpredictable about the result of an arbitration proceedings in advance , many arbitrators may chase after records that are available for reconsideration . A party to a dispute may have a general idea about an arbitrator by reviewing the earlier award made by the arbitrator .This will help the party to arrive at an informal guess as to what would be the outcome of the case in the hand

Finality : One of the main advantages of the arbitration is that arbitrator 's award is final and it can be overturned under certain legal environments only . Normally , arbitrators are not bound by the stricter rules of evidence that apply in court proceedings . For instance , hearsay evidence , in which documents in effect substitute for witness , may be permitted .Further , parties are willing to submit a dispute to arbitration , but are concerned that excessively loose rules of evidence could deprive of a fair trial . They can request arbitration clause that state about conducting the hearing , the arbitrator will be bound by a particular code of evidence .Under arbitration , an arbitration ruling can only be knocked over where an arbitrator `doles out his own image of industrial justice . Further , the party to the dispute has to demonstrate that the arbitrator had ruling . It is remotely uncommon for such occasion to happen . However court decisions are in the ordinary course , normally , modified or overturned and court decisions , can be , and in common , appealed to higher forums

Clarity : The arbitration agreement should define the type of relief that may be awarded by the arbitrator . Contract may also provide that arbitration should not award punitive damages or consequential damages In some cases , the agreement may provide that the arbitrator may award money damages but cannot direct specific performance of a contract

Other Advantages

One another salient feature of arbitration is that arbitrators appear to be less susceptible to emotional appeals since they see dozens of identical litigations . Juries , by contrast , are simply influenced by presentations that spotlight on feelings rather than reality

The parties to arbitration can limit by inserting an arbitration clause which provide that the arbitration will be governed by that particular body of law by inserting appropriate provision that the arbitration will be governed by that particular state or nation 's body of law

The most advantageous features of arbitration are that one can choose their own judge . The chosen judge should be impartial to both the parties providing a neutral ground for settlement of the dispute . The important features of the Quasi-judicial practice are impartiality and independence . The selected arbitrator should be free from personal biases and should not be inclined or interested in the outcome of the arbitration

For instance , in AT T Corporation and Lucent Technologies Inc v . Saudi Cable Company (2000 , AT T is a famous transnational company which was the successful bidder for a project in Saudi Arabia . One of the tender conditions specified that the cable required for the project should be purchased from Saudi Cables . Some disputes emanated between AT T and Saudi Cables and the same was referred to an ICC arbitration process which took place in London . Arbitrator made the award in favour of Saudi Cable . Aggrieved by the finding of the arbitrator , later AT T found out that there was a clerical error that arbitration tribunal chairman had not revealed his non-executive directorship with Nortel , a competitor of AT T . Relying on its finding , AT T appealed to set aside the award as the chairman of the tribunal appeared to be biased

However the Court of Appeal did not concur with this . It held that there should be real danger of bias and in this case , there was xistence of such real danger . As per ICC guidelines , ignoring or omitting to mention some position with some corporate does not make the chairman of the Tribunal guilty of misconduct . The Court of appeal was of the view that the Chairman of the tribunal was not disqualified by applying the English common law test of bias which is applicable to UK judges . As such , it was unjustifiable to regard that he was want of necessary independence as laid down by the ICC Rules . The Court further observed that AT T would have been successful had it objected the same at the commencement of proceeding if clerical error had not occurred . Thus the party to the dispute should be more alert and he could even succeed if he able to put forth a reliable bias evidences at the start of the proceedings itself and not after the release of final award or at the closing stages of the proceedings

Further , in arbitration process , there exist lesser formalities and technicalities as it facilitates the simplification of rules of evidence and simplified procedure offers reduction in legal costs and facilitate the parties to the dispute to represent themselves instead through legal counsels . Further , arbitration helps to minimise the workload of the governmental departments and judiciary

Arbitration is the alternate source of finding solution to a dispute in the domestic contract . Under Arbitration Act , the parties to the dispute are having freedom to choose their own arbitrators to represent their case , place of arbitration , language , applicable law etc . Thus it is evident that the arbitrators having been appointed by a party to the dispute have certain commitment to the parties who have nominated them and in turn the parties to the dispute are liable for the payment for the arbitrator 's fees in return for the awards from the arbitrators Thus there exists a close nexus between arbitrator and parties to the dispute under the arbitration agreement . Due to this close relationship there arises always a question whether arbitrators are immune from the issues of impartiality and independence while making their award . It is to be noted that no one should be judge of his own interest and the justice should be rendered on unbiased manner especially in arbitrational awards

Macob Civil Engineering Ltd v Morrison Construction Ltd - In this case adjudicator 's decision was implemented but the court also concluded that the abstract judgment was a proper system to finalise on jurisdiction issues . Due to this ruling , there was an upsurge in the number of cases referred to adjudication . It is true that due to existence of the full support to the adjudication process in U .K by the judiciary ,the number of cases seeking adjudication process is on the ever increase . [ my own words]

One another important ruling where an adjudicator 's finding was implemented even when the adjudicator committed a mistake in Bouyues [UK] Ltd v Dahl Jenson [UK] Ltd [2000] . This decision has sent an unambiguous message to the business that if the adjudicator correctly reviews the subject matter in dispute in the adjudication process , then his finding will be implemented even if it is apparently not correct . [ my own words]

There has been an amplifying trend for mega and complex disputes to be referred to adjudication such as distraction , delay and acceleration claims . Certain disputes , especially at the juncture of the completion of the project are too composite to allow a fair adjudication process within the time limits of the scheme . This has led to a presumption not all the disputes are competent enough to be referred to arbitration process and parties should think of employing arbitration process where it is feasible as it has been laid down in the R G Carter v Edmund Nutall 2002- Bowsher J . [ my own words]

However , arbitration is not free from criticism

One of the main criticisms is that it may not be necessarily cheap in cost as compared to the litigation process . In case , if the both plaintiff and respondent are represented by legal counsels who are destined to conduct the case as per the litigations procedures , then in such cases , savings in cost is only a mirage after taking into account overall cost involved in the large body of arbitral tribunal . Suppose if the tribunal is composed of three or more counsels , it would no doubt enhance the overall costs and hence , the legal counsels and arbitrators should be destined to control the cost by any means

It should be noted that the arbitrators should have the authority to limit the recoverable costs and however this is never employed in practice In arbitration , it is feasible to consent for a procedure which permits the parties to the dispute the prospect to demonstrate their cases by reference to documents in an arbitral hearing , without recourse to full blown cross examination of witnesses . Arbitration facilitates the parties to offer their cases it may help the arbitrator to examine at the crux of the dispute without concentrating on hearing oral examination and evidence . [ my own words]

In U .K , Section 24 of the Arbitration Act of 1996 stipulates that neutrality of an arbitrator is a must . If there arose any justifiable doubt as regard to the arbitrator 's impartiality , he can be removed on the application of the aggrieved party . Though , prerequisite of impartiality exists in U .S but there exists no special rights for removal .English law specifies stricter conditions such as parties can not communicate with the arbitrators with out giving notice to the other party of the dispute

Presently , there is an increasing trend in U .K towards use of mediation in commercial disputes as parties to the disputes have started to understand the benefits it unleashes to them . Further , the attitudes of the courts are also in favour of mediation process rather than the litigation . Recently , there are up surging appellate verdicts in the U .K which has started to impose costs on parties to the disputes who failed to mediate even after the recommendation by the courts . In a recent judgment , the court of appeals held that the legal vocation can no longer with impunity turn down rational demand o mediate

Andrew Buckingham v . Westminster Building Company Limited In this case the dispute was seeking a judgment from the High Court of Justice Queen 's Bench division to enforce an award of an adjudicator . The case relates to payment under construction contract where defendant restricts his financial liability by capping certain amount . It was finally held that the adjudicator 's award is binding on the respondent and there must be final judgment for appellant in the sum claimed . [my own words]

Harlow Milner Ltd v . Teasdale . This case pertains to an application by the Claimant , Harlow Milner Ltd in Royal Courts of Justice to award final on the Interim Charging issued during February , 2006 The case relates to construction adjudication between the parties to the dispute . In the adjudication process , the defendant lost the case Claimant was awarded ? 90 ,000 in favour of Claimant during May 2005 . The Claimant initiated a separate bankruptcy proceedings against respondent after he failed to pay the aforesaid award amount . Finally , the Claimant wanted to initiate TCC procedure specially designed to react with the adjudication enforcement . Finally , it was held that Interim was made final by the court . [my own words]

3 . CONCLUSION

Arbitration is the best way for resolving the dispute if the parties to the dispute exert much confidence in the process and on the arbitrator A most diligent arbitrator will not only concise of the veracity of the dispute but also assist to resolve the same in a reasonably , rapidly and with an extent of finality

In U .K , the advantages of the arbitration proceedings is still to be exploited and the Arbitration process is still to play a major part in finding solution especially to the commercial disputes . Thus , the advantages and benefits that are available under the Arbitration Act ,1996 should be permitted to gain the experience in Adjudication process and it should be at once put into effect by pursuing practices which are more analogous to the objectives and principles as acknowledged in Section 1 of the Act .[ Already it is referenced -Daniel Atkinson Adjudication or Arbitration 31 August , 2001 . www .atkinson-law .com] Thus the arbitration clause in any commercial contract offers many advantages like speedy disposal of the dispute , lesser cost and more convenient procedures

BIBILIOGRAPHY

BOOKS

Chukwumerije , Okezie , Choice of Law in International Commercial Arbitration . [CT : Quorum Books , Westport , 1994]

Erickson , Stephen K , and Marilyn S . Mcknight , The Practitioner 's Guide to Mediation : A Client-Centered Approach [Wiley , New York , 2001]

Mackie , Karl J , A Handbook of Dispute Resolution : ADR in Action [Routledge , New York , 1991]

JOURNAL ARTICLES

Bland , Timothy S , `What 's the Verdict on Arbitration ? Companies Are Increasingly Turning to Arbitration to Avoid the Courtroom . Find out How It Works and What Pitfalls to Avoid , [2002] SM , January , 85

Braun , Joseph . Arbitration - Promises Made , Promises Broken . [1998] PM November , 9

Budnitz , Mark E , `The High Cost of Mandatory Consumer Arbitration [2004] 67 ALCP , no . 1-2 , 133

Carbonneau , Thomas E , `The Exercise of Contract Freedom in the Making of Arbitration Agreements (2003 ) 36 VJTL , no . 4 , 1189

Jean R . Sternlight , `Creeping Mandatory Arbitration : Is It Just ? ` [2005] SLR , v 57 [5] ,

1631

Paul D .Carrington , ` The Revocability of Contract Provisions Controlling Resolution of Future Disputes between the Parties ` ,[2004] LCP 67 , issue 1-2 ,

207

Reuben , Richard C 'Democracy and Dispute Resolution : The Problem of Arbitration (2004 ) LCP 67 , no . 1-2 , 279

Timothy S .Bland , `What 's verdict on Arbitration ' [2002] SM , v 46 [1] ,

br 85 JOURNAL NAMES

ALCP -Arbitration Law and Contemporary Problems

VJTL -Vanderbilt Journal of Transnational Law

PAR - Public Administration Review

LCP - Law and Contemporary Problems

YLJ- Yale Law Journal

SM- Security Management

SLR - Stanford Law Review

PM - Public Management

Chukwumerije , Okezie , 1994 , p1

Chukwumerije , Okezie , 1994 , p2

Timothy S .Bland , 2002 ,

85

Chukwumerije , Okezie , 1994 , p3

statutelaw .gov .uk /content .aspx ?LegType All activetextdocid 1387906

Braun , Joseph , 1998 ,

9

Paul D .Carrington , 2004 , p207

Jean R . Sternlight , 2005 , p1631

HYPERLINK "http /r .winzy .com ?c schal-2 u http 3A 2F 2Fwzuy .ask .com 2Fr 3Ft 3Dp 2 6d 3Dsynus 26s 3Dwz 26c 3Dwz 26l 3Ddir 26o 3D0 26sv 3D0a300566 26ip 3Ddc e20ccc 26id 3DD7D512FD76CA4B32D3199643 26q 3DScottish 2BCouncil 2Bfor 2BInternational 2BArbitration 26p 3D1 26qs 3D121 26ac 3D3 26g 3D0f 810rlRzFlYoa 26en 3Din 26io 3D1 26b 3Dalg 26tp 3Dd 26ec 3D10 26pt 3DArbi tration 26ex 3D 26u 3Dhttp 3A 2F 2Fwww .scia .co .uk 2FArbitration .html http /www .scia .co .uk /Arbitration .html

Mackie , Karl J , 1991 ,

56

Chukwumerije , Okezie , 1994 , p75

Reuben , Richard C , 2004 ,

279

Timothy S .Bland , 2002 ,

85

When Drafting a Contract Clause Calling for Alternative Dispute Resolution there are numerous available alternatives , Purchasing Law Report , 2002 , Vol .2002 , Issue 3 ,

8

Chukwumerije , Okezie , 1994 , p10

[2000] EWCA Civ 154

[2000] EWCA Civ 154

Erickson , Stephen K , 2001 , p25

Carbonneau , Thomas Europe , 2004 , p1189

Stephen R .Bond , The Selection of ICC Arbitrators and the requirement of independence - 4 ARB INT 'L

300 ,301 (1988

1999 /TCC /30

[2000]BLR 522

[2002] BLR 359

Budnitz , Mark Europe , 2004 , p133

U .K .Arbitration Act , 1996 s 24

U .K Courts imposing costs for refusals to mediate , Legal Week Global Edition , June 23 , 2005

20041 [sic] EWHC .138 [TCC]

[2006] EWHC 535 [TCC]

Daniel Atkinson , Adjudication or Arbitration 31 August , 2001 www .atkinson-law .com

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