Arbitration

Arbitration has been used for the settlement of disputes between members of trade associations and different exchanges in the securities and commodities trade. Form of contracts contains a standard arbitration clause referring to the arbitration rules of the respective organization.

For at least a century, arbitration has been the dominant force in dispute resolution in areas such as shipping, commodities and construction. You can opt for a neutral forum and have a panel of three arbitrators, one chosen by each party, and the third (the chairman) chosen either by the parties or the two party-appointed arbitrators. In addition, you can keep your disputes away from the public eye, because arbitration takes place in private, unlike litigation in the court.

The main centers for international arbitration are: Paris, London, Geneva, Stockholm, New York, Hong Kong and Singapore. Which one is used depends on the background and businesses of the parties. Stockholm, for example, was always the place for arbitrating east-west trade disputes. London for shipping and commodities. Singapore looks set for a busy time in the coming months and years after the Asian financial crisis. These locations, the arbitration centers and lawyers working there, compete intensely. Arbitration bodies try hard to get their standard arbitration clause put into people's contracts, so they have a captive market once disputes arise. They do this by publicizing their activities and their rules.

What they are looking for is 'name recognition'. In Europe, Paris (home of the International Chamber of Commerce and its rules) probably has the best name recognition, followed by London (home of the London Court of International Arbitration), and Geneva.

What people look for in an arbitration is speed, cost effectiveness, confidentiality and reliability of the arbitrators and hence their decisions. The choice of venue involves a complex balancing of a number of factors:

- the availability of good experienced arbitrators;

- the availability of good experienced arbitration lawyers, and expert witnesses such as accountants and engineers;

- the cost of these people;

- the support or otherwise that the local legal system gives to arbitration.

- accessibility - basic things like flight access, good facilities (some of the best are now in the Gulf states), administrative back-up, good telecommunications, IT support and even climate.

National legislation also has to lend its support to such an important economic activity as arbitration.

Procedure. The method of selecting arbitrators is an important aspect of the arbitration process, for the arbitrator's ability and fairness is the decisive element in any arbitration. The general practice is for both parties to select an arbitrator at the time a conflict arises or at the time the arbitration agreement is concluded. The two arbitrators then select a chairman, forming a tribunal. Selection of arbitrators is also often made by agencies administering commercial arbitration tinder reestablished rules of procedure. The parties may either make their own selection or entrust the appointment of the arbitrators to the organization.

Challenges to the arbitration process are not uncommon. A party may claim, for example, that no valid arbitration agreement came into existence because the person signing the agreement had no authority to do so or that a condition precedent to arbitration had not been fulfilled. More often, arbitration is contested on the ground that the specific controversy is not covered by the agreement. In such cases, the issue of whether the arbitrator has authority to deal with the conflict is usually determined by a court.

The arbitration process is governed by the laws to which the parties referred in their agreement; otherwise, the procedure will be determined by the arbitrators. The arbitration proceedings must be conducted so as to afford the parties a fair hearing on the basis of equality. The arbitrator generally has the authority to request the parties and third persons to produce documents to enforce such a request by issuing subpoenas. If a party fails to appear at a properly convened hearing, without showing a legitimate cause, the arbitrator in most instances will proceed in the absence of that party and render an award after investigation of the matter in dispute.

Under the law and arbitration practice of most countries, the award is valid and binding upon the parties when rendered by a majority of the arbitrators

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