This explanatory overview is directed at businesses or individuals that are contractually drawn into required arbitration proceedings for commercial disputes, but who are unfamiliar with the arbitration procedure. The overview is also helpful for those who wish to consider arbitration as a mechanism for resolving potential or actual disputes.
Please be aware that given the legal nature of the subject of this article, parties are advised to obtain specific professional legal advice as to the suitability of arbitration for their needs. This article is intended to represent general oversight only in this regard. It is non-exhaustive, is not a recommendation of any procedure, is not legal advice and should not be relied on as such. The scope of the article does not include but may contribute to an understanding of statutory arbitration. For present purposes, our comments are based on and made in relation to disputes which are subject to the Arbitration Act 1996 (AA96).
What is arbitration?
Arbitration requires a written agreement (arbitration agreement) to arbitrate by way of appointing an arbitrator (a person) to form an impartial tribunal and for the parties to the arbitration to be bound by the arbitrator’s decision. Arbitration can be called an ‘alternative dispute resolution’ (or ADR) procedure, i.e. an alternative to court litigation. Other ADR procedures include expert determination, judicial adjudication and mediation.
Generally, for many types of commercial disputes arising from written agreements, including M&A (sale of business), shareholder, partnership and other complex business disputes, and, in terms of remedies sought, arbitration is the same as court litigation. Both lead to legally binding and court-enforceable awards dealing with issues of liability, financial damages, interest, and the parties’ costs (including the arbitrator’s costs and that of the appointing body if any).
Litigation, however, involves following a formal court procedure, which can be protracted and involve hearings conducted in public.
In contrast, the parties in arbitration have control of the process including the choice of the arbitrator (judge) who will manage the process from appointment through to the conclusion of the arbitration.
Furthermore, unlike litigation, arbitration is procedurally flexible and, therefore, potentially quicker and cheaper than litigation, and the whole process is conducted in private.
Also subject to the provisions of applicable arbitration law, the tribunal has discretionary inquisitory/investigatory powers for the ascertainment of facts and law.
Starting an arbitration
The requirements for starting an arbitration should be set out in the arbitration agreement, or the incorporated institutional arbitration procedural rules (for example the CIArb Arbitration Rules) if any. Default provisions are included in the Arbitration Act 1996 (AA96) [Arbitration Act 1996 (legislation.gov.uk)].
Appointing an arbitrator of choice
In appropriate circumstances, the parties may be advised to choose as their arbitrator someone who is not a lawyer but is a skilled and experienced arbitrator with expertise in the subject issues of the dispute.
It is not a natural prerequisite that an arbitrator must be a lawyer. A professional legal qualification to practice as a lawyer is not a professional qualification to practice as an arbitrator. In addition, certain types of dispute may be more suited to arbitrators with specific skill sets and examples can be found in the practice areas of maritime, commodities and property arbitrations.
The BTG Commercial Arbitration Forum provides qualified, accredited, experienced and specialist arbitration services in the resolution of M&A (sale of business), shareholder, partnership and other complex business disputes which include accounting, financial, valuation (share valuation), and quantification of loss issues. This is in addition to being skilled and experienced in dealing with legal and procedural issues including in complex multi-party disputes.
The requirements for the appointment of the arbitrator should be set out in the arbitration agreement, or the applicable rules if any. Default requirements are included in the AA96.
In the event that the parties are unable to agree on the appointee, they may be able to agree to instruct an appointing body or a professional institution to make the appointment on their behalf from arbitrator panels maintained or their membership. The parties may be able to set the selection criteria. An appointment fee will apply.
Conduct of the arbitration
The applicable arbitration law provides for the conduct of the arbitration and this may be supplemented by the arbitration rules (applicable rules) of an arbitral institution that the parties may agree to adopt.
Subject to the applicable arbitration law and rules, the parties have the autonomy to provide the arbitrator with executive powers for the procedural conduct of the arbitration.
Unlike court litigation, the parties can design the process to suit their needs and that of the dispute in consultation with the arbitrator. Particular procedural features may include:
- A preliminary procedural meeting between the arbitrator and the parties in person or by conference phone call/video call to discuss the dispute, the parties’ requirements and to aid the arbitrator in the design of procedural directions.
- Directions that allow for the parties to make their cases and address that of their opponents, including providing for disclosure of documents, submissions of arguments and supporting evidence including expert evidence.
- Procedural provisions for interim awards on particular issues.
- The processing of applications from the parties for variations to the tribunal’s directions.
- A hearing may or may not be required. If a hearing is required, its time and location would be as agreed between the parties and the arbitrator.
As at court, subject to the parties agreeing otherwise, when making their determination resolving the dispute and the issues involved the arbitration tribunal may be expected to evaluate and weigh the arguments and evidence of the parties, taking into account factors including relevance, admissibility, who has the burden of proof, the balance of probabilities, and the applicable law including considerations of justice. The tribunal’s decision would be set out in a document, customarily referred to as an ‘award’ and this would ordinarily be accompanied by reasons. A final award would include the allocation of the parties’ costs of the arbitration (their own legal costs, the arbitrator’s costs, and any appointing institution’s costs). Unless agreed, the determination of the recoverable costs will be a consideration.
Awards can be challenged in the High Court on limited grounds, particularly substantive jurisdiction and serious irregularity and appealed on a point of law.
AA96 (Section 66) provides for the enforcement of awards. Subject to the terms expressed therein: “An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.”
During the arbitration the parties are free to engage in or continue, settlement negotiations between themselves, and the tribunal would encourage this. If the parties were to settle their dispute (including interest if relevant on sums payable and costs), they may request that the arbitrator produces what is referred to as a ‘consent award’ giving court enforceability to the settlement terms reached.
The BTG Commercial Arbitration Forum [BTG Commercial Arbitration Forum (btgadvisory.com)] is led by Daniel Djanogly, a Partner at BTG Advisory. He is an experienced and qualified Chartered Arbitrator, Expert Determiner and Forensic Accountant Expert Witness.
If you would like to appoint an arbitrator or expert determiner or require further information on services, please contact Daniel Djanogly.
Please note, in view of the neutrality of the role of arbitrator or expert determiner, all correspondence will be on a disclosable basis.