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When you come across a commercial dispute in a business, there are various ways to resolve it. Ideally, you will settle your conflicts informally and amicably and avoid court proceedings. This will save time and money and help preserve the business relationship. However, there may be times when you need to use alternative dispute resolution (ADR) processes to avoid court litigation. Two of these methods are arbitration and adjudication. It is essential to understand these to choose which to use. This article will explain what arbitration and adjudication are and the difference between arbitration and adjudication for commercial disputes.
What is Arbitration for Commercial Disputes?
Arbitration is an alternative dispute resolution (ADR) method for commercial disputes. This means it is a method which is an alternative to court litigation. Either one arbitrator or a panel of them will make a binding decision on the business disagreement. It can take a long time to reach this and it is a formal process.
This guide outlines how to resolve commercial disputes.
For the arbitration process to proceed, parties to the conflict must both agree that arbitration is how they wish to resolve business disputes. They will often have a contract between them to this effect. The contract will contain details of:
- how many arbitrators they will use;
- the rules which apply;
- where the arbitration will happen;
- the language they will use, and
- the jurisdiction covering the process.
When arbitration takes place, you can carry it out with rules that the parties agreed on for the arbitration procedure. Alternatively, the commercial parties can carry out the arbitration using rules of arbitral laws such as the following:
- International Chamber of Commerce (ICC);
- International Centre for Dispute Resolution (ICDR); or
- London Court of International Arbitration (LCIA).
What is Adjudication for Commercial Disputes?
Adjudication is also a method of ADR, but it is a quick one that you may use for your commercial dispute. An adjudicator will make an award at the end of the adjudication procedure. You predominantly find that the construction uses adjudication for business disputes.
This is because they have their legal right in statutory law – the Housing Grants Construction and Regeneration Act 1966. This details that the decision or award shall be complete within 28 days of the dispute referral date, which is a quick process. However, this can be longer if agreed upon. Adjudication is a reasonably low-cost procedure to resolve commercial disputes.
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What is the Difference Between Arbitration and Adjudication for Commercial Disputes?
Although arbitration and adjudication are both methods of alternative dispute resolution (ADR), there are some critical differences between the two. The table below highlights the differences between arbitration and adjudication for commercial disputes.
| Arbitration | Adjudication |
| The decision is binding | The decision is temporarily binding |
| Used for a variety of commercial disputes | Usually used by construction companies |
| It is a long and formal process | It is a quick process for an ADR method |
| There is no statutory right for construction companies to use this process | Construction companies have a statutory right to this process |
Key Takeaways
If you fall into a commercial dispute, you may use an alternative dispute resolution (ADR) method, such as arbitration or adjudication. These both help you to avoid or delay commercial litigation. Still, there are critical differences between the two. Arbitration is where you and the other party decide on an arbitrator or a panel of arbitrators to hear your dispute. They will make a binding decision after looking at the evidence. You can use arbitration for various commercial disputes, yet adjudication is usually for construction industry disputes.
Adjudication, however, is an ADR process which results in a temporarily binding decision of the business dispute. The construction industry often uses it for disputes as they have a statutory right. The adjudication decision must be complete within 28 days of the adjudication referral.
If you need help understanding the difference between arbitration and adjudication for commercial disputes, LegalVision’s experienced disputes and litigation solicitors 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. Call us today on 0808 196 8584 or visit our membership page.
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