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3 Key Considerations About Arbitration Proceedings for Your Commercial Dispute

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When you run a business, your commercial activity will not always go smoothly. Instead, your company may have a commercial dispute at some point. Where this occurs, you will need to choose a way to resolve it. One option is commercial arbitration, including international arbitration if the dispute is with a company in a different jurisdiction. If you do choose arbitration, it is important to have a good understanding of the arbitration process. This article will, therefore, explain three key considerations you should have about arbitration proceedings for your commercial dispute. 

What is Commercial Dispute Arbitration? 

Arbitration is an alternative dispute resolution (ADR) method to resolve a commercial dispute. It is an alternative to court litigation, which should instead be a final option. Arbitration is different from court litigation and is often:

  • cheaper;
  • confidential;
  • quicker; and 
  • more flexible.

Commercial arbitration is where you and the other party appoint an arbitrator or panel of arbitrators as the tribunal for your commercial dispute. They will be experts in the area of dispute and, after listening to both parties’ evidence, will make a decision. This is an arbitral award.  

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What Are Some Important Considerations About Arbitration for My Commercial Dispute?

If you are considering arbitration for your commercial dispute, there are some interesting considerations you may not be aware of. Knowing these factors can affect if you will use arbitration to resolve your dispute or select another form of ADR. We explain these considerations below.  

1. Arbitration as Mandatory and Binding

You may be deciding if arbitration is the most suitable ADR method for your commercial dispute compared to forms such as mediation or conciliation. Alternatively, you may be thinking about court proceedings as your preferred route. Regardless, you should know that arbitration for your commercial dispute can be mandatory and binding. This tends to occur if you have an arbitration clause in your contract with the other party, making arbitration the primary dispute resolution format. If so, you have no choice but to use this ADR method and give up your right to court litigation. 

2. Arbitration Awards Enforcement

Pros and Cons of Including an Arbitration Clause in Your Contract in the UKAlthough arbitration awards are legally binding, they are not directly enforceable, unlike court judgements. Therefore, to enforce an arbitration award, you will need to go to court to do so. However, this can be a costly and time-intensive step, as it is likely the other party will fight your attempts to enforce it. Also, it can be easy for the other party to avoid enforcement of an arbitral award purposely. This is because arbitrators cannot usually enforce interim measures (interlocutory measures) against a party to keep the award enforceable whilst the dispute is ongoing. As such, if you are prioritising a certainly binding and enforceable solution against the other party, you should note this factor about arbitration. 

3. Cross-Border Disputes

Furthermore, arbitration is often the chosen form to resolve a cross-border or international commercial dispute. This is because commercial arbitration acts as a neutral mechanism. As each party is from a different country, if the commercial dispute is resolved in one of their countries, that party may have an advantage. Instead, parties to a commercial dispute can choose a country where the arbitration can occur. This location is known as the seat of arbitration. An example of a popular location choice, or seat, is the London Court of International Arbitration (LCIA). 

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Key Takeaways

If you fall into a commercial dispute you may choose arbitration to resolve this. Arbitration is an alternative dispute resolution (ADR) method that you can use before resorting to court litigation. The process involves one arbitrator or a panel deciding an arbitral award on you dispute. When deciding whether to engage in arbitration proceedings, three important considerations you should have are: 

  • where arbitration is mandatory and binding, you and the other party forfeit your rights to use court litigation;
  • arbitration awards are not directly enforceable, and must be enforced in court; and
  • cross-border or international commercial disputes commonly use arbitration. 

If you need help understanding arbitration for your commercial dispute in the UK, LegalVision’s experienced disputes and litigation 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. Call us today on 0808 196 8584 or visit our membership page.

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Clare Farmer

Clare Farmer

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