Arbitration

Resolving business disputes – whether in court or by arbitration – is a core part of what we do. We have arbitrated disputes in all the major arbitration venues, such as the AAA, LCIA, JAMS, ICC, HKIAC and CIArb

When you enter into an agreement, you may agree that disputes be resolved by arbitration. Arbitration involves working out disputes without going to court. A neutral third-party arbitrator is chosen to hear both sides to the dispute and make a decision.

Many people prefer arbitration to litigation, as it is quicker and less expensive.

Should you include an arbitration Clause in a contract. 

Assuming that the US party entering an agreement with you demands that disputes be resolved in the US, a foreigner should strongly consider including an arbitration clause in the contract.  This is so under almost any circumstance, such as:

  1. To avoid costly US litigation.
  2. Where the dispute can be technical by nature. In this case, having a reputable industry professional decide the dispute can be very important.
  3. Arbitrations are confidential as opposed to lawsuits which are public

Arbitration clauses in a contract

Courts will generally enforce arbitration clauses in contracts.  The arbitration clause will usually set forth how the arbitration is to take place – including issues such as choosing who the arbitrator is, or how he is chosen, place of arbitration, applicable law, appealability/finality of decision, etc.

Stages of Arbitration

  1. Prepare before initiating the arbitration
  2. Initiating Arbitration. A case may go to arbitration in one of two ways: either one side initiates it, or both parties agree to arbitrate. In the first case, one party decides to invoke the arbitration clause and drafts a demand for arbitration. This document sets forth:
  • The nature of the dispute;
  • The relief (resolution) they seek – usually monetary damages
  • The identify of and addresses of all parties; and
  • The arbitration clause of the contract.

Appointment of Arbitrator

The party seeking the arbitration files the demand with the arbitration authority set forth in the contract.  That arbitration authority sends the parties a list of proposed arbitrators. 

The parties delete any names they oppose, and number the remaining names in order of preference.  If the parties cannot agree on an arbitrator, the arbitration authority will make appoint one.

Hearing

In preparing for the arbitration hearing, parties should assemble all evidence that will be presented at the hearing. Witnesses should be prepared.   In many US states and arbitration authorities, the arbitrator has the power to subpoena documents and witnesses.

Arbitration hearings are conducted like court trials, except that arbitrations are less formal.  Arbitrators are generally not required to follow formal rules of evidence. As a result, arbitrators often accept evidence that judges would not. Arbitrators may also conduct inspections or investigations if necessary.

The main limitation of the arbitrator is the arbitration clause.  The arbitrator may not exceed the authority granted him/her by the arbitration agreement.  Other than that, the arbitrator has broad discretion as to how to conduct the arbitration. 

Award

The award is the decision of the arbitrator on the matters submitted to him or her under the arbitration agreement. Many times, and in an effort to resolve disputes finally and conclusively, the parties agree that the award is final and may not be appealed. 

Summary

In summary, arbitration is often a cost effective and private way to resolve contractual disputes, especially in the international setting.

 

 

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