Alternative forms of dispute resolution: why and when to choose arbitration?

When the parties are in a conflict situation and cannot resolve the matter by themselves, going to court is usually the next step. However, conflicts between parties can be resolved in various ways. One of these dispute resolution methods is arbitration. Arbitration is a form of private justice and thus an alternative to legal proceedings.

Alternative forms of dispute resolution: why and when to choose arbitration?

But why would you choose arbitration instead of the usual legal route? The arbitration procedure differs fundamentally from the judicial procedure. The following points not only describe the differences between the two dispute resolution modes, but also highlight the benefits of arbitration:

  • Expertise. The difference with legal proceedings is that in arbitration the conflict is resolved outside the court. The parties may appoint (an odd number) of independent experts themselves. They form an arbitration committee (or the arbitration board) that handles the conflict. Unlike the judge, the experts, or the arbitrators, work in the relevant field in which the dispute takes place. As a result, they have direct access to that specific knowledge and expertise that is necessary for settling the present conflict. And because the judge usually does not have such specific knowledge, it often happens in legal proceedings that the judge deems it necessary to be informed by experts about certain parts of the dispute. Such an investigation usually causes a significant delay in the procedure and is also associated with high costs.
  • Time lapse. Apart from delays, for example by involving experts, the procedure itself usually takes quite a long time before a regular judge. After all, procedures themselves are regularly postponed. It often happens that the judges, for reasons not known to the parties, decide to postpone the judgment once or several times by six weeks. An average procedure can therefore easily take one or two years. Arbitration takes less time and can often be settled within six months. There is also no possibility to file an appeal in arbitration. If the arbitration committee makes a decision, the conflict comes to an end and the case will be closed, which keeps lengthy and expensive procedures to a minimum. This is only different if the parties explicitly agree with each other on the possibility of an appeal.
  • In the case of arbitration, the parties themselves bear the costs of the procedure and the use of expert arbitrators. In the first instance, these costs may turn out to be higher for the parties than the costs of going to ordinary courts. After all, the arbitrators usually have to be paid per hour. However, in the longer term, the costs in the arbitration proceedings for the parties may be lower than the costs in the legal proceedings. After all, not only does the judicial procedure take more time and therefore procedural actions, but in that case external experts may be required that means increasing costs. If you win the arbitration procedure, the arbitrators may also transfer all or part of the costs you made in the procedure to the other party.
  • In the case of ordinary judicial proceedings, hearings are in principle open to the public and the decisions of the proceedings are often published. This course of events may not be desirable in your situation, given the possible material or non-material damage. In the event of arbitration, the parties can ensure that the content and outcome of the case remain secret.

Another question is when can it be wise to choose for arbitration instead of the usual legal route? This may be the case when it comes to a conflict within the specific branches. After all, for various reasons, such a conflict usually requires not only a solution within a short period of time, but also and above all the expertise that can be guaranteed and provided in the arbitration procedure in order to reach a solution. Arbitration law is a separate branch of sport that is often used in business, construction, and real estate.

In view of the above-mentioned points, it is important for the parties, when concluding an agreement, to pay attention not only to the commercial or financial aspects, but also to consider the dispute resolution situation. Do you submit any dispute with the other party to the ordinary court or choose for arbitration? If you choose for arbitration, it is sensible to establish an arbitration clause in writing in the contract or the general terms and conditions at the start of the relationship with the other party. The result of such an arbitration clause is that the ordinary court must declare itself to have no jurisdiction if, despite the binding arbitration clause, a party submits a dispute to it.

Furthermore, if the independent arbitrators have delivered a judgment in your case, it is important to keep in mind that this ruling is binding for the parties. This means that both parties must adhere to the arbitration committee’s verdict. If they do not, the arbitration committee can ask the court to oblige the parties to do so. If you do not agree with the judgment, you cannot submit your case to the court after the arbitration procedure has ended.

Are you unsure whether agreeing to arbitration is a good choice in your case? Please contact the Law & More specialists. You can also contact Law & More if you want to draw up an arbitration agreement or have it checked or if you have questions about arbitration. You can also find more information about arbitration on our arbitration law site.

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