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Settling disputes by arbitration

29 October 2009
Settling disputes by arbitration

Parties looking to resolve financial disputes without trudging through the courts can opt to have their case heard by an arbitrator instead, explains Daniel Djanogly.


THE PROBLEM

Our hotel refurbishment was severely delayed when, midway through, our builders took on another project in tandem with ours. I would like to seek compensation for the potential business lost as a result of this delay, but is going to court the only solution?


THE LAW

Taking cases such as this to court can absorb a great deal of time, energy and expense. If both sides want to reach a resolution but negotiations are not working, an alternative might be arbitration.

Arbitration is a private, binding, dispute-resolution method. It is conducted under the tailored arrangements that the parties in dispute have themselves agreed on or according to rules issued by an appointing authority to which both parties have agreed.

The Arbitration Act 1996 supports and regulates arbitrations in England, Wales and Northern Ireland. The general principles are to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay and expense. Parties are free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.

Arbitrators act in a judicial capacity, weighing the arguments and evidence before reaching a decision. They need not be experts in the subject matter of the dispute but may be chosen for their relevant expertise to help evaluate technical evidence. Awards are given in writing, ordinarily with reasons, and are legally enforceable. The arbitrator may award interest where appropriate and the costs of the arbitration. The possibility of appeal to the courts exists but in limited circumstances.

There are other private alternative dispute resolution methods - eg, expert determination, mediation and adjudication, which may also be considered.


EXPERT ADVICE

Owing to its procedural flexibility, arbitration offers a less-expensive, quick and effective substitute to litigation for business-related financial disputes.

You and your builder will need to agree to submit your dispute to arbitration. Under the act, such an agreement will need to be in writing. You can choose a qualified arbitrator with particular technical knowledge (in your case, someone who can quantify financial losses including lost profits, in addition to dealing with other issues that may be in dispute).

You and your builder will then need to agree with the arbitrator on how the case should proceed, including timings and the applicable law or other basis for settling the dispute. Indeed, should you both wish, you can dispense with any formal hearing and proceed on a documents-only basis: ie, the arbitrator would review only the documents of the case and the arguments and evidence to support these.

Essentially, you and your builder are giving the arbitrator permission to sort out your problem confidentially and in a way that suits you both. Accordingly the matter can be ring-fenced and the existing relationship protected. As mentioned, like a court judgment the decision is binding and legally enforceable.


CHECKLIST

  • Consider taking legal advice and conducting your own research into the private alternative dispute resolution methods available to you.
  • Consult with your builder on these methods.
  • If you both agree on arbitration, you will need a written agreement to submit the dispute to arbitration.
  • Identify and agree on a suitable arbitrator or on a method of selection in the event of disagreement - for example, to invite the president of a professional body or arbitral institution to make an appointment.

BEWARE

Avoid approaching arbitration as a formal litigation process as this could result in a costly, lengthy situation similar to court proceedings. Those who embrace the informality and flexibility of the arbitration process are more likely to get the benefits it can offer.


CONTACT

Daniel Djanogly, partner, Kingston Smith LLP
020 7566 3763
ddjanogly@kingstonsmith.co.uk

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