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If a commercial dispute does occur, you, as a business owner, need to understand the methods to resolve it and what these involve. It is best to avoid commercial court litigation, which can be costly. Commercial arbitration, which includes international arbitration, is one possible alternative dispute resolution (ADR) method for your business. While national and international commercial arbitration for international trade as a form of commercial dispute resolution can be effective, it can also present potential challenges. Being aware of arbitration proceedings challenges can help you avoid them in commercial disputes. This article will explain three potential challenges in arbitration for your commercial dispute.
Defining Commercial Arbitration
Commercial arbitration is an ADR method to resolve a business dispute. It is a formal procedure that lies outside of the court and is confidential. Commercial arbitration includes an independent third-party arbitrator or panel of arbitrators. They examine and listen to both parties’ evidence provided on the commercial dispute. They will then use their expertise to decide on the commercial dispute with a legally binding decision. This is known as an arbitration award or arbitral award.
This guide outlines how to resolve commercial disputes.
Three Potential Challenges in Arbitration for Commercial Disputes
Arbitration is an alternative to commercial litigation and could work well for your commercial dispute. However, there can be potential challenges as part of the arbitration procedure. We explain three challenges in commercial arbitration below.
1. Enforcing or Disputing an Arbitral Award
When arbitration proceedings end, the arbitrator makes a legally binding decision, which is an arbitral award. A challenge for your arbitration dispute could be if you wish to enforce or dispute an arbitral award. This is because to do either, you must go through a court of law, despite the arbitral award being legally binding. Furthermore, if you or the other party wish to dispute an arbitral award, there are limited legal grounds for doing so. Court proceedings in court are also very costly, and these expenses can sometimes outweigh your reasons for resorting to ADR in the first place.
2. Using Virtual Hearings for Commercial Arbitration
It is possible to carry out your arbitration using virtual hearings. Whilst this was usually mandatory during the COVID-19 pandemic, you may feel online arbitration still suits your circumstances better. For example, virtual proceedings may be useful as they:
- reduce potential travel or accommodation costs;
- cater to different time requirements more easily; and
- can be more environmentally friendly.
However, you should be aware that virtual proceedings can cause challenges in arbitration for your commercial dispute. Some potential obstacles include:
- technology failing;
- internet disturbances; and
- risks to the confidential nature of the arbitration proceedings, such as ensuring evidence is secure and safeguarded.
3. Getting the Right Arbitrator
Part of the arbitration process will involve you and the other commercial party to the dispute choosing your arbitrator or panel of arbitrators. You must select your arbitrators or arbitrator panel as carefully as possible, as the wrong choice could make the arbitration more challenging.
Importantly, the arbitrator is an expert on the subject matter rather than an independent third party. Therefore, if your commercial dispute is concerned with technical issues involving specialised jargon or complex issues, the arbitrator must understand this well. Otherwise, valuable dispute resolution time may be hampered by unqualified arbitrators trying to understand relevant concepts sufficiently. Therefore, you must look into the arbitrator’s background and experience when you select them.
It is also essential to ensure that when you choose an arbitrator, you are not challenged under the Equality Act 2010. This could occur if you discriminate when choosing because the arbitral agreement specifies traits the arbitrator must have, such as a particular religion.
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Key Takeaways
Commercial arbitration is a confidential and formal alternative dispute resolution (ADR) method of resolving a commercial dispute. It involves an arbitrator or panel of arbitrators listening to the evidence and making a decision, which is an arbitral award. Although arbitration can be advantageous for your commercial disagreement, it can present challenges. These include:
- legal costs if you want to dispute or enforce an arbitral award;
- challenges related to virtual arbitration; and
- arbitrator selection.
If you need help understanding potential challenges in arbitration for your commercial dispute in the UK, LegalVision’s experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
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