A pre-cursor to an arbitration agreement is a contract that provides for the resolution of disputes arising out of or in connection with the contract that is being arbitrated. This usually involves inserting a clause into the contract that obliges the parties to resolve any disputes that arise out of or in connection with the contract. The arbitration provision in a contract is usually the first step in the process of resolving disputes. There are a number of key aspects that can be agreed upon in the arbitration provision:
- the place (i.e. seat) and language of the arbitration;
- the number of arbitrators; and
- the procedural rules that will govern the arbitration
An effective arbitration clause is very important to avoid getting dragged into the courts. If the dispute does not fall within the scope of the clause, parties could find themselves in court.
An arbitration clause in a contract is a self-contained contract, which means that it will still function even if the main contract is not valid.
How arbitrators are Appointed
The appointments of the arbitrators are made in accordance with the terms and rules of the arbitration agreement or the national law of the relevant institution. Usually, disputes are referred to one or more arbitrators. Each party can then select one of the three arbitrators to serve as its chairman.
If a party does not have an agreement with the arbitration institution, then the appointment of the arbitrators is usually made by the institution or an appointed authority.
The powers and duties of the tribunal
The main duties of a tribunal are to determine a dispute fairly and efficiently and to adopt procedures that are designed to minimize the time and costs involved.
Fees in Arbitration
Usually, the fees are paid up-front. They are usually calculated according to the time that the members of the tribunal spent on the case. If the case is being handled by an institution, the fee will also be charged to that institution.
Different arbitral institutions have their own set of procedural rules. These rules provide the framework for the various steps involved in an arbitration proceeding.
The rules of these institutions are updated to reflect the needs and expectations of their users. Some of these institutions provide fast-track procedures for disputes under certain conditions.
Although the procedures adopted by different institutions provide different opportunities for parties to present their case, they generally agree that written submissions should be the main component of the dispute resolution process. Some institutions, such as the International Center for Arbitration (ICC), prefer a Memorial approach, while others, such as the LCIA, favour a staged approach.
In some cases, the parties may also agree on a schedule for interim hearings. These hearings can be held in a different venue if the parties are not able to reach an agreement. Usually, the arbitral tribunal will deliver an award within six months. This can be done by encouraging the parties to deliver the award promptly.
An arbitration award is similar to a judgment in litigation. It is final and binding, and it can only be challenged if the reasons for its award are properly stated. Usually, the award must be in writing and include the date and seat of the arbitration.
Unlike court judgments, awards can only be challenged in very limited circumstances. This includes cases where the tribunal has failed to follow its own procedures or where the award has been obtained through fraud.