Recently, I conducted a Question & Answer session with Ayisha Robertson aimed at explaining; the concepts of arbitration, what arbitration covers, and which situations it is best suited for.
Watch the full video or read the transcript below.
Interviewer: What exactly is an Arbitration?
Stewart Patterson: Arbitration under the Arbitration Act is an alternative to litigation. It is a means of having a dispute decided without going to Court.
Interviewer: How does it work?
Stewart Patterson: An Arbitrator is appointed by the parties to decide their dispute. He will arrange a hearing at which evidence can be given by the parties and any witnesses they may have. The case will be fully argued and afterwards the Arbitrator will decide the case and produce a written “award”. His award is final and binding on the parties.
Interviewer: What is an “award?”
Stewart Patterson: An award is the equivalent of a judgement in a court case. In his award the Arbitrator will set out his conclusion on any of the matters he has been asked to decide. He may make a declaration as to the rights and wrongs of the case, and an order for one or more of the parties to do something, or to pay some money to the other. He can even award interest on any sum of money due.
Interviewer: How does this differ from Mediation.
Stewart Patterson: With a mediation the Mediator does not actually decide the case. He assists the parties in reaching an agreement. An arbitrator actually makes a decision.
Interviewer: When is an arbitration more appropriate than a mediation?
Stewart Patterson: When there is no possibility of reaching an agreement and it is necessary for someone to make a decision. As I am both an arbitrator and mediator it is possible for me on the rare occasions which require it for me to change hats and become a mediator in order to help the parties reach agreement.
Interviewer: How long does an arbitration hearing take?
Stewart Patterson: It can last as long as it takes the parties to present their respective cases, but the Arbitrator can limit the amount of time taken in the interests of economy. So it could last a whole day, or even several days in a complicated matter.
Interviewer: Who should go to arbitration?
Stewart Patterson: Sometimes there is an arbitration clause in the contract. This means that either party can insist on going to arbitration rather than to court. Whether there is or not, the parties can agree to have their dispute dealt with by an Arbitrator.
Interviewer: What sort of disputes can be dealt with by arbitration?
Stewart Patterson: Any sort of dispute can be dealt with by arbitration. It is particularly popular in construction disputes. However, as well as building contracts, all sorts of other contracts and disputes are appropriate for arbitration. Disputes about property, boundary disputes restrictive covenants landlord and tenant and other matters can equally be dealt with by an arbitrator.
Interviewer: What is the advantage of going to Arbitration rather than to Court?
Stewart Patterson: If you take a case to Court, it may take a very long time before it is concluded and a decision is made. This often takes months and sometimes even runs into years. This is because of the number of things which have to be dealt with before trial. The case on each side has to be set out in formal documents called pleadings. Papers and electronic records accumulated during the transactions giving rise to the dispute have to be disclosed. Witness statements have to exchanged, and usually there have to be one or more preliminary hearings. Because the courts are very booked up, there is often a long waiting period before even a preliminary hearing takes place let alone the full trial. When I am appointed as Arbitrator, I try to shorten this period by cutting down on the preliminary matters, and by making myself available at relatively short notice.
Interviewer: What other advantages does arbitration have over court proceedings?
Stewart Patterson: Arbitration proceedings are confidential, whereas court proceedings are open to the public. With arbitration you get to choose your own arbitrator, whereas with court proceedings you have to accept the judge you are given, whether or not he is sympathetic, and whether or not he is familiar with the type of case you have. With an arbitrator you can choose an arbitrator who is familiar with the type of case you are bringing to him. You can also choose somebody who will be able to conduct the arbitration and produce an award at a time convenient to you and the other party, and crucially, not too far ahead. That is why I liaise with the parties to pick a time and place suitable to everybody.
Interviewer: What about the relative cost of arbitration and court proceedings?
Stewart Patterson: Partly because court proceedings are so long and drawn out, it can be very expensive, sometimes running to many thousands of pounds. An arbitration should be very much cheaper. Of course, this depends upon the arbitrator dealing with the case quickly. Although you have to pay the arbitrator’s fee, arbitration should still be less expensive than court proceedings. Bear in mind you now have to pay a fee to the court to start proceedings at all, and this in many cases will be 5% of the value of the claim. If there are any applications which have to be made to the court while the proceedings are pending, these attract a fee as well.
Interviewer: Where does an arbitration take place?
Stewart Patterson: An arbitration can take place anywhere, but should be at a place convenient to the parties. Court proceedings can be moved from one court centre to another for the convenience of the court. Arbitration proceedings can take place in any room, typically in a room hired for the purpose.
Interviewer: What makes a good arbitrator?
Stewart Patterson: A good arbitrator is one who has the interests of the parties at heart. He will act fairly as between the parties and will make sure that he understands the case of each. He must be firm in his conduct of the proceedings, but should also be considerate. After all it is the parties were paying him. In the end he must also be decisive, for it is the purpose of the arbitration to reach a fair and just conclusion to the dispute.
Interviewer: How is the arbitrator chosen?
Stewart Patterson: He may be chosen by agreement between the parties after they have done their research. If they cannot agree, then you can apply to have an arbitrator appointed by one of the leading organisations concerned with arbitration, such as the Chartered Institute of Arbitrators. In this case, you will have to pay a fee, so this is something which can be saved if you can agree upon arbitrator. Furthermore, you lose the chance of choosing the arbitrator.
Interviewer: Who pays for the arbitration?
Stewart Patterson: Initially normally the parties each pay a half share of the arbitrator’s fee for the hearing in advance. That way his neutrality can be guaranteed. When he makes his award however he can order either of the parties to pay the costs or a proportion of them. Normally the losing party would have to pay all the costs including those of the other side. In this case one party will have to compensate the other for any sums paid. The Arbitrator well not usually deliver his award until he has been paid in full. The parties are jointly and severally liable for his fees, so if one party refuses to pay the other may have to.
Interviewer: Do I need to have a barrister or solicitor to represent me?
Stewart Patterson: It is entirely up to you. You are free to represent yourself. On the other hand if the matter is at all complicated it is probably better to instruct a barrister or solicitor or both. The cost of doing so is worthwhile if there is much at stake. Your representative will know how to present the case, and in particular for instance what questions to ask the witnesses on the other side.
Interviewer: Supposing I think that the case is going against me. Can I bring the arbitration to an end?
Stewart Patterson: No. Once the arbitrator has been appointed an arbitration agreement signed, there is no going back on it, the arbitrator has control.
Interviewer: If I don’t like the result of the arbitration, can I appeal?
Stewart Patterson: An award by an arbitrator is intended to be final. Only in very limited circumstances can a review be required, for example if the Arbitrator has behaved improperly. The arbitration agreement is likely to exclude the possibility of a review even if he gets the law wrong. That is one reason to choose an arbitrator well versed in the applicable law. With a judgment of the court a party is entitled to ask permission to appeal, and it will be granted if he has a real prospect of success. This means that the proceedings will carry on for many months more. The purpose of an arbitration is that the decision of the arbitrator should be final and will bring proceedings to an end so that you can put the whole matter behind you.
Interviewer: How do you approach an arbitration in cases where you have been appointed?
Stewart Patterson: I take an early view as to what preparatory steps need to be taken by the parties and ensure that those steps are taken but that no further action is ordered which is superfluous to the case. This enables me to agree an early date with the parties because I am aware that they wish to have the matter decided as soon as possible so that they can put it behind them and get on with life. However, it is important that the matter should not be so rushed that I do not have an opportunity to consider all relevant matters and it is important that both sides know that their case has been properly heard and considered that they have had a fair hearing. After the hearing, I try to get the award out as soon as possible.