In recent years, arbitration has gained popularity as a method of resolving international commercial disputes and is being applied in many countries. One of the main reasons for the increasing popularity of arbitration is the model Law on International Commercial Arbitration which was drafted by the United Nations Commission on International Trade Law (UNCITRAL).
The UNCITRAL model law on International Commercial Arbitration has been adopted by many countries that have enacted modern arbitration laws.
The model law is the first international standard, providing guidance and benchmark for law regulators in different countries while reforming and modernising their laws on Arbitration. It provides a dispute resolution regime which covers all stages of the arbitration process from the arbitration agreement, the composition and jurisdiction of the arbitral tribunal, the extent of court intervention, and the process for recognition and enforcement of the arbitral award.
This article discusses the definition of arbitration and provides brief information about various types of arbitration.
Definition of Arbitration
There is no universally accepted definition of arbitration. In general terms, it refers to a method of dispute resolution in which the parties to a contract select a neutral sole arbitrator (or a panel of arbitrators) to present their dispute for a legally binding and final ruling. Therefore, by entering into an arbitration agreement, the parties commit to submit certain matters to arbitrators' decision rather than have them resolved by law courts. If one of the parties files a lawsuit which is the subject of an arbitration agreement, the other party may challenge the court's jurisdiction (the court's power to hear and adjudicate the lawsuit) on the ground that the parties have waived their right to solve their dispute by court.
There are many reasons why arbitration has become important in solving international commercial disputes. In general, parties wish to keep commercial disputes confidential and private in order to protect their commercial reputation and business secrets. Furthermore, the arbitration process is much faster and cheaper compared to litigation in courts.
In an international dispute, the parties are from different nations, or have their places of business in different countries. One of the parties may be reluctant to accept national court litigation even if the court is unbiased, as the other party who is litigating at home is using his regular lawyer, who is familiar with the court procedures. Therefore, arbitration offers the parties more control over how proceedings will be conducted.
Fundamental features of arbitration
Arbitration is a mechanism for the settlement of disputes.
Arbitration provides a dispute settlement mechanism for the parties. If there is no dispute, there can be no arbitration. Therefore, when parties agree to arbitration, they remove their dispute from the jurisdiction of national court.
Arbitration is consensual.
The parties must consent to arbitrate the disputes that may arise or that have arisen between them. Also, the jurisdiction and power of the arbitrators are limited to that which the parties have agreed.
Arbitration leads to a final and binding determination of parties' right and obligation.
Basically, the decision of arbitrators is final and binding, there are very limited grounds on which arbitrators' verdicts can be challenged and appealed in the court on the ground that the arbitrators' conclusions are wrong.
Types of Arbitration
There are two basic types of arbitration: ad hoc and institutional. Both of these types are based on the parties' agreement. It is a choice that the parties must make when they decide to submit their dispute to arbitration.
In institutional arbitration, the parties will choose the rules of a particular organization such as the International Chamber of Commerce (ICC) or the Qatar International Centre of Arbitration, and that institution will generally organize and supervise the arbitration proceedings and provides support services that are very important for arbitration.
On the other hand, in ad hoc arbitration, the parties will construct themselves a dispute resolution regime without the assistance and supervision of an arbitration institution. The parties will have to decide and choose the arbitrators, or set up the mechanism for their appointment. Furthermore, they should agree on the place and language of arbitration, the applicable procedures, rules, and the arbitrators' fees. However, it is important to mention that the UNCITRAL rules on arbitration are suitable for use in ad hoc arbitration, because they are designed to provide ad hoc arbitration with a mechanism to oversee stages of the arbitral process. The UNCITRAL, however, will not involve in the arbitration process.
Summary
The popularity of arbitration has increased in recent years. Arbitration is considered to be a method of resolving a dispute between the parties particularly in international commercial disputes.
The term arbitration has never been defined internationally. However, there are basic features for arbitration in general.
By Dr Zain Al Abdin Sharar
© The Peninsula 2009
