Arbitration
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Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. Arbitration in the United States and in other countries often includes alternative dispute resolution (ADR), a category that more commonly refers to mediation (a form of settlement negotiation facilitated by a neutral third party). It is more helpful, however, simply to classify arbitration as a form of binding dispute resolution, equivalent to litigation in the courts, and entirely distinct from the various forms of non-binding dispute resolution, such as negotiation, mediation, or non-binding determinations by experts.

Arbitration is, today, most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions and sometimes used to enforce credit obligations. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states.

History
It is not known exactly when formal non-judicial arbitration of disputes first began but it can be said with some certainty that arbitration, as a way of resolving disputes predates formal courts. Records from ancient Egypt attest to its use especially with high priests and their interaction with the public. Arbitration was popular both in ancient Greece and in Rome.[1][2]

Under English law, the first law on arbitration was the Arbitration Act 1697,[3] but when it was passed arbitration was already common. The first recorded judicial decision relating to arbitration was in England in 1610.[4] The noted Elizabethan English legal scholar Sir Edward Coke refers to an earlier decision dating from the reign of Edward IV (which ended in 1483). Early arbitrations at common law suffered from the fatal weakness that either party to the dispute could withdraw the arbitrator's mandate right up until the delivery of the award if things appeared to be going against them (this was rectified in the 1697 Act).

The Jay Treaty of 1794 between Britain and the United States sent unresolved issues regarding debts and boundaries to arbitration, which took 7 years and proved successful.

In the first part of the twentieth century, many countries (France and the United States being good examples) began to pass laws sanctioning and even promoting the use of private adjudication as an alternative to what was perceived to be inefficient court systems.

The growth of international trade however, brought greater sophistication to a process that had previously been largely ad hoc in relation to disputes between merchants resolved under the auspices of the lex mercatoria. As trade grew, so did the practice of arbitration, eventually leading to the creation of a variant now known as international arbitration, as a means for resolving disputes under international commercial contracts.

Today, arbitration also occurs online, in what is commonly referred to as Online Dispute Resolution, or ODR. Typically, ODR proceedings occur following the filing of a claim online, with the proceedings taking place over the internet, and judgment rendered on the basis of documentation presented. net-ARB***** is the world's leader in Internet Arbitration.


Nature of arbitration
Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed will be final and binding. Arbitration is not the same as:

judicial proceedings, although in some jurisdictions, court proceedings are sometimes referred as arbitrations[5]
alternative dispute resolution (or ADR)[6]
expert determination
mediation

Advantages and disadvantages of arbitration
Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:

when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed
arbitration is often faster than litigation in court
arbitration can be cheaper
arbitral proceedings and an arbitral award are generally private
the arbitral process enjoys a greater degree of flexibility than the courts
because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce abroad than court judgments
in most legal systems, there are limited avenues for appeal of an arbitral award, which can mean swifter enforcement and less scope for a party to delay matters.
However, some of the disadvantages of arbitration can be that:

the parties need to pay for the arbitrators, which adds an additional layer of legal cost
although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
in some legal systems, arbitral awards have fewer enforcement remedies than judgments
arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore
rule of applicable law is not binding, and arbitrators not subject to overturn on appeal may be more likely to rule according to their personal ideals
large corporations may exert inappropriate influence in consumer disputes, pressuring arbitrators to decide in their favor or lose future business

Arbitrability
By their nature, the subject matter of some disputes are not capable of arbitration. In general, two groups of legal procedures cannot be subjected to arbitration:

Procedures which necessarily lead to a determination which the parties to the dispute may not enter into an agreement upon:[7] Some court procedures lead to judgments which bind all members of the general public, or public authorities in their capacity as such, or third parties, or which are being conducted in the public interest. Examples: Until relatively recently (80s), antitrust matters were not arbitrable in the United States.[8] Matters relating to crimes, status and family law are generally not considered to be arbitrable, as the power of the parties to enter into an agreement upon these matters is at least restricted. However, most other disputes that involve private rights between two parties can be resolved using arbitration. In some disputes, parts of claims may be arbitrable and other parts not. For example, in a dispute over patent infringement, a determination of whether a patent has been infringed could be adjudicated upon by an arbitration tribunal, but the validity of a patent could not: As patents are subject to a system of public registration, an arbitral panel would have no power to order the relevant body to rectify any patent registration ****d upon its determination.
Some legal orders exclude or restrict the possibility of arbitration for reasons of the protection of weaker members of the public, e.g. consumers. Examples: German law excludes disputes over the rental of living space from any form of arbitration[9], while arbitration agreements with consumers are only considered valid if they are signed by either party,[10] and if the signed document does not bear any other content than the arbitration agreement.[11]

Arbitration agreement
See also: Arbitration clause
Arbitration is a consensual process; parties will only ever arbitrate where they agree to do so.[12] Such agreements are generally divided into two types:

agreements which provide that, if a dispute should arise, it will be resolved by arbitration. These will generally be normal contracts, but they contain an arbitration clause
agreements which are signed after a dispute has arisen, agreeing that the dispute should be resolved by arbitration (sometimes called a "submission agreement")
The former is the far more prevalent type of arbitration agreement. Sometimes, legal significance attaches to the type of arbitration agreement. For example, in certain Commonwealth countries, it is possible to provide that each party should bear their own costs in a conventional arbitration clause, but not in a submission agreement.

In keeping with the informality of the arbitration process, the law is generally keen to uphold the validity of arbitration clauses even when they lack the normal formal language associated with legal contracts. Clauses which have been upheld include:

"arbitration in London - English law to apply"[13]
"suitable arbitration clause"[14]
"arbitration, if any, by ICC Rules in London"[15]
The courts have also upheld clauses which specify resolution of disputes other than in accordance with a specific legal system. These include provision indicating:

that the arbitrators "must not necessarily judge according to the strict law but as a general rule ought chiefly to consider the principles of practical business"[16]
"internationally accepted principles of law governing contractual relations"[17]
Agreements to refer disputes to arbitration generally have a special status in the eyes of the law. For example, in disputes on a contract, a common defence is to plead the contract is void and thus any claim ****d upon it fails. It follows that if a party successfully claims that a contract is void, then each clause contained within the contract, including the arbitration clause, would be void. However, in most countries, the courts have accepted that:

a contract can only be declared void by a court or other tribunal; and
if the contract (valid or otherwise) contains an arbitration clause, then the proper forum to determine whether the contract is void or not, is the arbitration tribunal.[18]
Arguably, either position is potentially unfair; if a person is made to sign a contract under duress, and the contract contains an arbitration clause highly favourable to the other party, the dispute may still referred to that arbitration tribunal. Conversely a court may be persuaded that the arbitration agreement itself is void having been signed under duress. However, most courts will be reluctant to interfere with the general rule which does allow for commercial expediency; any other solution (where one first had to go to court to decide whether one had to go to arbitration) would be self defeating.


Applicable laws
Arbitration is subject to different laws. These may be summarized as follows:

The law governing the arbitration agreement
The law governing the arbitral tribunal and its proceedings (lex arbitri - procedural law)
The law governing the substance of the dispute
The law governing recognition and enforcement of the award

Severability and law governing the arbitration agreement
The arbitration agreement which is part of the main contract (often referred to as "container contract") is governed by the law which governs the main contract. An important feature of arbitration, however, is severability - the fact that arbitration agreement lives a life of its own and is autonomous of the main agreement. Invoking the invalidity of the main agreement may not necessarily bring with it the invalidity of the arbitration clause. Another feature closely tied to this is "competence-competence" - the ability of the arbitration tribunal to decide on its own jurisdiction. Therefore a party who is trying to avoid arbitration at an early stage by claiming that the main contract is invalid will face the arbitration agreement separate from the main one and the arbitrators deciding on their own competence.


Seat of the arbitration
Most legal systems recognise the concept of a "seat" of the arbitration, which is a geographical and legal jurisdiction to which the arbitration is tied. The seat will normally determine the procedural rules (lex arbitri) which the arbitration follows, and the courts which exercise jurisdiction over the seat will have a supervisory role over the conduct of the arbitration.

Parties to the arbitration are free to choose the seat of arbitration and often do so in practice. If they do not, the arbitral tribunal will do it for them. Whereas it is possible to detach procedural law from the seat of arbitration (e.g. seat in Switzerland, English procedural law) this creates confusion as it subjects the arbitration to two controlling and possibly conflicting laws. The procedural law of arbitration, normally determined by the seat, ought to be distinguished from the procedure that the arbitration panel will follow. The latter refers to daily operation of the arbitration and is normally determined either by the institution in question (if arbitration is institutional, e.g. ICC Rules) or by reference to a ready-made procedure (such as the UNCITRAL Rules).

The seat of arbitration might not be the same as the place where proceedings are actually happening. Thus, for instance, an ICC arbitration may have its seat in London (and therefore be governed by the English lex arbitri and ICC procedural rules) and most sessions may take place outside the UK.


Law applicable to procedure
The essential matters of procedure -- such as any disagreement over the appointment or replacement of arbitrators, the jurisdiction of the tribunal itself, or the validity of an arbitration award -- are determined by the procedural law of the seat of the arbitration, and may be decided by recourse to courts. The parties normally influence this through their choice of the seat of arbitration or directly through choice of procedural law.

All other matters of procedure are generally determined by the arbitral tribunal itself (depending on national law and respect for due process) and the preferences of the arbitrators, the parties, and their counsel. The arbitrators' power to determine procedural matters normally includes:

mode of submitting (and challenging) evidence
time and place of any hearings
language and translations
disclosure of documents and other evidence
use of pleadings and/or interrogatories
the appointment of experts and assessors

Law applicable to substance
Parties in a commercial dispute will often choose the law applicable to the substance of their dispute. In fact, they are more likely to choose substantive than procedural law as this will have direct impact on the outcome of their dispute. This choice is usually expressed in the arbitration clause itself or at least in part of the contract where the clause is located.

If the parties do not choose the applicable law the arbitral tribunal will. This is normally interpreted as the ability of the tribunal to choose the choice-of-law rules which will, in turn, point to the applicable law. The arbitrators are not strictly speaking bound by public policy order or mandatory rules of third states but will normally observe them as that increases the chance of the award being recognized.

The tribunal may decide ex aequo et bono only if the parties have expressly authorized them to do so.


Law applicable to recognition and enforcement
The law that applies to issues of recognition will always be the law of the state where this recognition is sought. In a large number of states this will be governed by 1958 New York Convention which harmonizes the recognition and enforcement of foreign arbitral awards.


Sources of law
States regulate arbitration through a variety of laws. The main body of law applicable to arbitration is normally contained either in the national Private International Law Act (as is the case in Switzerland) or in a separate law on arbitration (as is the case in England). In addition to this, a number of national procedural laws may also contain provisions relating to arbitration.

By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are:

The Geneva Protocol of 1923
The Geneva Convention of 1927
The European Convention of 1961
The Washington Convention of 1965 (governing settlement of international investment disputes)
The UNCITRAL Model Law (providing a model for a national law of arbitration)
The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration)

Arbitral tribunal
Main article: Arbitral tribunal
The term, arbitral tribunal is used to denote the arbitrator or arbitrators sitting to determine the dispute. The composition of the arbitral tribunal can vary enormously, with either a sole arbitrator sitting, two or more arbitrators, with or without a chairman or umpire, and various other combinations.

In most jurisdictions, an arbitrator enjoys immunity from liability for anything done or omitted whilst acting as arbitrator unless the arbitrator acts in bad faith.

Arbitrations are usually divided into two types:

ad hoc arbitrations and administered arbitrations.
In ad hoc arbitrations the arbitral tribunals are appointed by the parties or by an appointing authority chosen by the parties. After the tribunal has been formed, the appointing authority will normally have no other role and the arbitation will be managed by the tribunal.

In administered arbitration, the arbitration will be administered by a professional arbitration institution providing arbitration services, such as the LCIA in London or the ICC in Paris. Normally the arbitration institution also will be the appointing authority.

Arbitration institutions tend to have their own rules and procedures, and may be more formal. They also tend to be more expensive, and, for procedural reasons, slower.[19]

Most television court shows are considered to be binding arbitration.


Duties of the tribunal
The duties of a tribunal will be determined by a combination of the provisions of the arbitration agreement and by the procedural laws which apply in the seat of the arbitration. The extent to which the laws of the seat of the arbitration permit "party autonomy" (the ability of the parties to set out their own procedures and regulations) determines the interplay between the two.

However, in almost all countries the tribunal owes several non-derogable duties. These will normally be:

to act fairly and impartially between the parties, and to allow each party a reasonable opportunity to put their case and to deal with the case of their opponent (sometimes shortened to: complying with the rules of "natural justice"); and
to adopt procedures suitable to the circumstances of the particular case, so as to provide a fair means for resolution of the dispute.[20]

Arbitral awards
Main article: Arbitration award
Although arbitration awards are characteristically an award of damages against a party, in many jurisdictions tribunals have a range of remedies that can form a part of the award. These may include:

payment of a sum of money (conventional damages)
the making of a "declaration" as to any matter to be determined in the proceedings
in some jurisdictions, the tribunal may have the same power as a court to:
order a party to do or refrain from doing something ("injunctive relief")
to order specific performance of a contract
to order the rectification, setting aside or cancellation of a deed or other document.
In other jurisdictions, however, unless the parties have expressly granted the arbitrators the right to decide such matters, the tribunal's powers may be limited to deciding whether a party is entitled to damages. It may not have the legal authority to order injunctive relief, issue a declaration, or rectify a contract, such powers being reserved to the exclusive jurisdiction of the courts.

Enforcement of arbitration awards
One of the reasons that arbitration is so popular in international trade as a means of dispute resolution, is that it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

Under the New York Convention 1958, an award issued a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defences.

Only foreign arbitration awards can be subject to recognition and enforcement pursuant to the New York Convention. An arbitral decision is foreign where the award was made in a state other than the state of recognition or where foreign procedural law was used.[21]

Virtually every significant commercial country in the world is a party to the Convention, but relatively few countries have a comprehensive network for cross-border enforcement of judgments of the court.

The other characteristic of cross-border enforcement of arbitration awards that makes them appealing to commercial parties is that they are not limited to awards of damages. Whereas in most countries only monetary judgments are enforceable in the cross-border context, no such restrictions are imposed on arbitration awards and so it is theoretically possible (although unusual in practice) to obtain an injunction or an order for specific performance in an arbitration proceeding which could then be enforced in another New York Convention contracting state.

The New York Convention is not actually the only treaty dealing with cross-border enforcement of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral Awards 1927 [1] remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilised in practise.


Arbitration with sovereign governments
Certain international conventions exist in relation to the enforcement of awards against states.

The Washington Convention 1965 relates to settlement of investment disputes between states and citizens of other countries. The Convention created the International Centre for Settlement of Investment Disputes (or ICSID). Compared to other arbitration institutions, relatively few awards have been rendered under ICSID.[22]
The Algiers Declaration of 1981 established the Iran-US Claims Tribunal to adjudicate claims of American corporations and individuals in relation to expropriated property during the Islamic revolution in Iran in 1979. The tribunal has not been a notable success, and has even been held by an English court to be void under its own governing law.[23]

Challenge of arbitral awards
Generally speaking, by their nature, arbitration proceedings tend not to be subject to appeal, in the ordinary sense of the word.

However, in most countries, the court maintains a supervisory role to set aside awards in extreme cases, such as fraud or in the case of some serious legal irregularity on the part of the tribunal.

Only domestic arbitral awards (i.e. those where the seat of arbitration is located in the same state as the court seised) are subject to set aside procedure.

In American arbitration law there exists a small but significant body of case law which deals with the power of the courts to intervene where the decision of an arbitrator is in fundamental disaccord with the applicable principles of law or the contract.[24]

Unfortunately there is little agreement amongst the different American judgments and textbooks as to whether such a separate doctrine exists at all, or the circumstances in which it would apply. There does not appear to be any recorded judicial decision in which it has been applied. However, conceptually, to the extent it exists, the doctrine would be an important derogation from the general principle that awards are not subject to review by the courts.


Costs
In many legal systems - both common law and civil law - it is normal practice for the courts to award legal costs against a losing party, with the winner becoming entitled to recover an approximation of what it spent in pursuing its claim (or in defense of a claim). The U.S.A. is a notable exception to this generally applicable rule, as except for certain extreme cases, a prevailing party in a US legal proceeding does not become entitled to recoup its legal fees from the losing party.

Like the courts, arbitral tribunals generally have the same power to award costs in relation to the determination of the dispute. In international arbitration as well as domestic arbitrations conducted in countries where courts may award costs against a losing party, the arbitral tribunal will also determine the portion of the arbitrators' fees that the losing party is required to bear.


Nomenclature
As methods of dispute resolution, arbitration procedure can be varied to suit the needs of the parties. Certain specific "types" of arbitration procedure have developed, particularly in North America.

Judicial Arbitration is, usually, not arbitration at all, but merely a court process which refers to itself as arbitration, such as small claims arbitration before the County Courts in the United Kingdom.[5]
High-Low Arbitration, or Bracketed Arbitration, is an arbitration wherein the parties to the dispute agree in advance the limits within which the arbitral tribunal must render its award. It is only generally useful where liability is not in dispute, and the only issue between the party is the amount of compensation. If the award is lower than the agreed minimum, then the defendant only need pay the lower limit; if the award is higher than the agreed maximum, the claimant will receive the upper limit. If the award falls within the agreed range, then the parties are bound by the actual award amount. Practice varies as to whether the figures may or may not be revealed to the tribunal, or whether the tribunal is even advised of the parties' agreement.
Non-Binding Arbitration is a process which is conducted as if it were a conventional arbitration, except that the award issued by the tribunal is not binding on the parties, and they retain their rights to bring a claim before the courts or other arbitration tribunal; the award is in the form of an independent assessment of the merits of the case, designated to facilitate an out-of-court settlement.
Pendulum Arbitration refers to a determination in industrial disputes where an arbitrator has to resolve a claim between a trade union and management by making a determination of which of the two sides has the more reasonable position. The arbitrator must choose only between the two options, and cannot split the difference or select an alternative position. It was initiated in Chile in 1979 and has proved to be a very effective mechanism.
This form of arbitration is also known as ****ball Arbitration. It takes its name from a practice which arose in relation to salary arbitration in Major League ****ball.
Night ****ball Arbitration is a variation of ****ball arbitration where the figures are not revealed to the arbitration tribunal. The arbitrator will determinate the quantum of the claim in the usual way, and the parties agree to accept and be bound by the figure which is closest to the tribunal's award.
c==Bibliography==

Christian Buhring-Uhle and Gabriele Lars Kirchhof. Arbitration and Mediation in International Business, 2nd Edition (2006)
R David. Arbitration in international trade (1985)
Yves Dezalay and Bryant G. Garth. Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order, (1998)
The Permanent Court of Arbitration. International Alternative Dispute Resolution: Past, Present and Future, (2000)
Julian Lew, Loukas Mistelis, Stefan Kroell, Comparative International Commercial Arbitration, (2003
www.pwc*****/arbitrationstudy
A Redfern and M Hunter, Law and Practice of International Commercial Arbitration 4th Edition (2004)
Tibor Varady, John J. Barcelo, and Arthur Taylor Von Mehren. International Commercial Arbitration 3rd Edition (2006)

Footnotes
^ http://links.jstor.org/sici?sici=000...3E2.0.CO%3B2-N
^ HOLO Books
^ 9 & 10 Will. III c.15
^ Vynior's Case (1610) 8 Co Rep 80
^ a b In the United Kingdom, small claims in the County court are dealt with by a procedure called "small claims arbitration", although the proceedings are held in front of a district judge, paid for by the state. In Russia, the courts dealing with commercial disputes is referred to as the Supreme Court of Arbitration of the Russian Federation, although it is not an arbitral tribunal in the true sense of the word.
^ Although all attempts to determine disputes outside of the courts are "alternative dispute resolution" in the literal sense, ADR in the technical legal sense, is the process whereby an attempt to reach a common middle ground through an independent mediator as a basis for a binding settlement. In direct contrast, arbitration is an adversarial process to determine a winner and a loser in relation to the rights and wrongs of a dispute. Island Arbitration Mediation in Mineola, N.Y. is the most commonly used forum in the state. disputed
^ Cf. e.g. Section 1030 subsection 1 of the German Zivilprozessordnung.
^ Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985)
^ Section 1030 subsection 2 Zivilprozessordnung
^ To be correct: A certain form, as defined by statute, of an electronic signature using a chip card and a PIN code is also sufficient
^ Section 1031 subesction 5 of the Zivilprozessordnung. The restriction does not apply to notarized agreements, as it is presumed that the notary public will have well informed the consumer about the content and its implications.
^ Although parties are sometimes unaware that they have agreed to arbitrate, for example, where they sign terms and conditions which provide for arbitration without reading them.
^ Swiss Bank Corporation v Novrissiysk Shipping [1995] 1 Lloyd's Rep 202
^ Hobbs Padgett & Co v J C Kirkland (1969) 113 SJ 832
^ Mangistaumunaigaz Oil Production v United Kingdom World Trade [1995] 1 Lloyd's Rep 617
^ Norske Atlas Insurance Co v London General Insurance Co (1927) 28 Lloyds List Rep 104
^ Deutsche Schachtbau v R'As al-Khaimah National Oil Co [1990] 1 AC 295
^ For example, under English law see Heyman v Darwins Ltd. [1942] AC 356
^ For example, all arbitral awards issued by the ICC have to be reviewed internally before being handed down, which helps certainty and improves the quality of awards, but leads to delay and expense.
^ For example, in England these are codified in section 33 of the Arbitration Act 1996
^ Article 1 of the 1958 New York Convention
^ Tupman, "Case Studies in the Jurisdiction of the International Centre for Settlement of Investment Disputes" (1986) 35 ICLQ 813
^ Dallal v Bank Mellat [1986] 1 QB 441
^ The expression appears in the majority judgment in the U.S. Supreme Court decision in Wilko v Swan 346 US 427 (1953