Arbitration

“to examine; give judgement”.

Awards are binding and as enforceable as a court judgement. It is similar to

adjudication in many respects, but is confrontational and allows fully for
natural justice. The Arbitrator is not obliged to issue a decision in 28 days
(as in adjudication), he has whatever time is necessary. However, rather
strict timetables are laid down by the professional bodies who appoint
arbitrators. The time limits however can be easily circumvented!
Arbitration is governed by the Arbitration Act 1996.
It is the formal settlement of a dispute by a third person chosen by the parties
or at least chosen by a predetermined method agreed by the parties. The
arbitrator settles the dispute by means of issuing an award which is as
enforceable as a court decision. An arbitrator’s award can be appealed in
the High Court only on a question of law. The court may confirm, vary, set
aside or send back an award.
If a contract contains an arbitration award – even if the contract is void, then
the arbitration agreement may remain in tact - it is a contract within a contract
(separability S7). Reference to a standard form that contains an arbitration
agreement automatically incorporates the arbitration agreement. However,
in Aughton v Kent it was held that referring to a document between two
other people did not incorporate the arbitration agreement in that
document. There are many arbitration agreements and their validity is
described in the Act.
JCT incorporates the Construction Industry Model Arbitration Rules (CIMAR)
and allows for:
 A full procedure with a hearing;
 A procedure without a hearing (documents only);
 A short procedure with a hearing.
Certain sections of the Arbitration Act are discretionary and the parties can
agree that they should not apply. A default position normally applies where
they do not contract out of these discretionary provisions. E.g. powers of the
arbitrator. Mandatory sections by contrast always apply regardless of the
parties’ contract.
Where a contract includes an arbitration clause S9 of the Act says that the
courts must stay any legal proceedings and refer the matter to
arbitration. This is supported by Halki Shipping v Sopex Oils 1997.
JCT05 assumes arbitration but this must be specifically included in the
Contract Particulars otherwise litigation applies.

Litigation and arbitration compared

Short informal arbitrations are often quick cheap and convenient -

arbitrations can be conducted at any place and at any time. Large scale
complex Arbitrations with multi parties however can cost as much and last
as long as litigation.
Litigation is state run and the forum is a public court where the judge and
court room come free whereas Arbitration is industry run with the Arbitrator
and rooms at the parties’ cost.
Complex technical questions can be heard at arbitration by a technical expert
of the parties’ choice, not necessarily a legally qualified one, whereas
complex legal issues are possibly more suited to trial by judge. Judges of
the TCC can be appointed as Arbitrators.
Arbitration is a private matter whereas litigation is in the public domain.
Arbitrators may be softer than judges and may be less likely to find in favour
of one party in entirety.
Arbitration is less formal and more flexible.
Arbitrators may have to seek legal assistance, especially on knotty legal
issues – this gives rise to extra costs for the parties.
The increasing involvement of lawyers in the Arbitration process has tended
to emasculate it. The evidential and procedural requirements that apply to
litigation are now part of the arbitral process.

Pre-Requisites to Arbitration or Litigation

Parties are now obliged to attempt conciliation or some other form of dispute
resolution before resorting to arbitration or litigation (pre-action protocol).