Dr. Liaqat Malik is a member of The Chartered Institute of Arbitrators
A member of London Court of International Arbitrations.
If you have a commercial dispute and you require an arbitrator or mediator
you may contact Dr. Malik's office who can give you terms and conditions of appointment.
ARBITRATION, ADVANTAGES AND DISADVANTAGES BY Dr.LIAQAT MALIK PH.D (Law), MCIArb
The arbitration Act 1996 is the backbone of arbitration law in England and Wales. Parliament decided against simply adopting the UNCITRAL model Law, as there was already an extensive body of arbitration law in England that went beyond UNCITRAL. Indeed, the 1996 Act has been described as “Super UNCITRAL”. It was also said that arbitration proceedings in England too closely resembled High Court proceedings and appeals wee too easy, and the 1996 Act sought to address that. The act and the support the courts have given at are credited with having boosted London’s popularity centre for arbitration.
The Advantages of Arbitration:
Arbitration is resilient and has a long history. English law dates from 1189 AD (the first year of the reign of King Richard 1), whereas arbitration goes back way beyond that. In the dark ages, arbitration was carried out by a bishop; arbitration is clearly traceable through the Roman period; and indeed in ancient Egypt, old arbitral awards could be sold off as waste papyri to be reused by embalmers to make mummies.
There are considerable similarities between court and arbitral proceedings. Both must apply the substantive law, which relates to the rights and obligations of the parties under the contract between them, although there are differences in procedural law, which relates to the methods by which those rights and obligations are ascertained. The most immediate differences are that a judge in court represents the authority of the state, whereas in arbitration the relationships are contractual in nature, both between the parties themselves and between them and the arbitrator. Also, the parties have considerable choice as to the procedure by which their particular dispute is decided. There may be documents-only proceedings or “look/sniff” proceedings before a sole arbitrator, or full-blown adversarial proceedings before a panel of arbitrators addressed by phalanxes of lawyers and expert witness.
Arbitrators have a responsibility to the trading communities from whence they spring. Arbitration should be practical and adaptable, economical in time and money, without stultifying legal procedure. The complexities of the white book have no place in arbitration. The relationships are wholly different to those that pertain in court proceedings and an arbitrator is doing a different job to a judge.
The arbitrator should be an expert in the field of the dispute, so that he can proceed efficiently. Technical evidence is quicker to deliver; because he knows how to exploit the help he is given. Indeed, he may be invited to use his own expertise (after all that is what he is there for) which may remove the need for separate expert witness.
The parties may represent themselves or be represented by someone of their choice, perhaps a company director intimately familiar with the details of the case. Hearings are held at a place by them. Arbitration takes place in private, which benefits those who do not want their dirty laundry washed in public or sensitive commercial information revealed. Businessmen who hope to do future business with each other may prefer to submit their disputes to their peers and keep them within the family. An arbitral award is final unless the parties have agreed the right of appeal or the court grants leave (which is rare), whereas in court proceedings there are always risks of delays, additional costs and uncertainty caused by appeals. Finally, the New York convention offers a better means of enforcement than is available for court judgement.
In comparison with court proceedings, arbitration is widely regarded as the superior form of dispute resolution for technical disputes. Arbitration should be quicker and cheaper, the decision is final and more easily enforceable internationally. The perceived shortcomings can be addresses by adopting appropriate procedures, particularly 100 day arbitration. Domestic arbitration should join its big brother, international arbitration, as the dispute resolution mechanism of first choice for technical disputes.
The Perceived Disadvantages of Arbitration:
There was a feeling amongst practitioners that arbitration had become too legalistic, bogged down by technical procedure and legal niceties. Conversely, and paradoxically, most parties in arbitration are represented by lawyers who are trained in court procedures rather than arbitration procedures, and they expect court procedure. The arbitrator may feel obliged to adopt procedures which have developed to suit the way the courts operate, instead of selecting procedures appropriate to the particular dispute.
There is also a feeling amongst lawyers that arbitration takes longer and costs more than court litigation. The case a few years ago of a leading arbitrator who took two years to publish his decision was seen as typical of the weakness of arbitration, by lawyers who knew none of the details but who scorned arbitration. The judge who took two and a half years to deliver his decision went unnoticed. Clearly, there are examples of poor arbitrators and poor procedure, but this has been and will be addressed in the training provided by the ClArb. The arbitrator should “take the case by the scruff of the neck and shake the facts out of it”. In practice, arbitrators may be overly keen to seek the approval of parties who they hope might appoint them again in the future.
The Return of Arbitration:
Disquiet has been expressed that adjudication may not be appropriate for all disputes, particularly professional negligence, or complex issues arising from a final account, or where other matters that should be taken in to consideration are not covered by the referral to adjudication. Further, the adjudicator must reach his decision within a set time limit, and the defendant is not bound to grant an extension to that time limit, which may leave the adjudicator with insufficient time to reach a decision. Conversely, where the parties do agree substantial extensions of time, the adjudication process become more like arbitration, but without the finality of an arbitral award.
In term of international dispute resolution, arbitration is clearly the procedure of first choice. One party may be reluctant to submit disputes to court in the other party’s home country, which may be biased or corrupt or may simply have procedures that appear obscure or inaccessible. Further, an arbitral award is easier to enforce under the New York Convention (which has been ratified by more than 140 countries) than is judgment from a court of law. Within Europe, the European Convention on International Commercial Arbitration of 1961 sought to promote the New York Convention by facilitating commercial arbitration in Europe. Institutions that administer international arbitrations report an increase in their workload.
Numerous Conventions promote arbitration for commercial matters between nations, particularly intellectual property, shipping, and investment disputes, especially in North and South America, the Middle East and Africa. The international cotton association, for example, comprises 60% of the world’s cotton traders, and their arbitral awards must be obeyed or the party in default will not be allowed to trade.
English and American lawyers are more active than others in international arbitration and they have enormous influence on procedural law. Indeed, the “English rule” that costs should follow the event is becoming the norm in international arbitration.
On the domestic front, the picture is less rosy. We have seen the growth of London as a centre for international arbitration, and the withering of domestic construction arbitration, although rent review and sports arbitration is said to be increasing. Many of the shortcomings of construction arbitration as against adjudication can be addressed by the “100 Day Arbitration” procedure proposed by the Society of Construction Law. It may take a little longer than adjudication (although not always) but it is more thorough and it produces a final decision.