Commercial Arbitration: A Short Guide

commercial arbitration

What is commercial arbitration?

Commercial arbitration is a specific type of alternative dispute resolution (ADR) that is typically used to settle disagreements in business relationships. Commercial parties often choose arbitration to resolve conflicts outside of court. It’s a popular option for dispute resolution.

The parties involved in commercial arbitration are usually businesses or commercial entities that have some sort of commercial relationship. Many types of disputes can arise within business relationships. These may include contract disputes, failing to deliver goods or services and intellectual property disputes.

Often business contracts include a clause for arbitration. This is known as an arbitration agreement. Both parties will agree to partake in commercial arbitration, as opposed to litigation in the courts, should any dispute arise. However those who do not have an arbitration clause in their contract can still access arbitration proceedings when a dispute has arisen by subsequent agreement to arbitrate.

In an arbitration tribunal, a panel of arbitrators, containing members who are experts in the relevant area of law or industry regarding the dispute, are there to listen and resolve the conflict from the evidence provided by the parties. The decision from the arbitrator is final and legally binding, called an arbitral award, resolving the dispute.

Commercial arbitration is a preferred method used to resolve business disputes for several reasons. Commercial disputes can often involve sensitive and confidential business information. This information would become public if the dispute was to proceed to court proceedings. Additionally, arbitration offers a much more efficient timeline in regards to resolution, saving both parties valuable time and money.

If you would like more information on commercial arbitration, our team of commercial solicitors are ready to assist you. Please do not hesitate to contact us today to find out more.

Types of Commercial Arbitration

Ad Hoc Arbitration

This type of arbitration allows for the parties to have more control and flexibility over the proceedings. This is because the process is conducted without the involvement of any arbitral institution.

Parties can choose the arbitrators, agree on the location and the procedural rules, which may be national laws and practices or the UNCITRAL model law rules.

The ad hoc arbitration process ultimately allows for more flexibility. However, the parties involved may have to put more effort into the organisation of the process.

Institutional Arbitration

Institutional arbitration follows set guidelines and procedures laid out by official arbitral institutions such as the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA). Unlike ad hoc arbitration, institutional arbitration has set rules and standardised procedures, administrative support and panels of experienced arbitrators for parties to utilise.

International Arbitration

International commercial arbitration follows the same principles as domestic arbitration. However, it is carried out on a global scale and may involve parties from different countries.

This type may encompass legislation outside of English law, and arbitrators may instead apply the principles of international law.

One benefit of using international commercial arbitration is that it is easy to enforce awards in different countries. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows for the enforcement of arbitral awards in more than 160 countries.

Enforcing and challenging arbitral awards

The decision made in arbitration is legally binding. The winning party can enforce the award through the court. Enforcement may encompass collecting damages or seizure of assets. As previously mentioned, The New York Convention provides a comprehensive and streamlined process of enforcing awards in many countries. This further enhances the appeal of commercial arbitration to many businesses worldwide. 

A party may wish to challenge an arbitral award, though it is worth noting that the grounds to challenge are very limited as arbitration is meant to be final and legally binding. A party may consider challenging an award if there was a serious irregularity in the proceedings that caused injustice. In very limited cases, a party may consider challenging on a point of law. This means that the arbitrator made a serious error in applying the relevant laws to the case.

How can South Bank Legal assist?

South Bank Legal are a leading team of commercial solicitors in England and Wales. Our legal professionals are highly experienced and can provide advice and assistance with commercial arbitration.

Our commercial solicitors provide legal services on a wide range of commercial disputes issues. These include intellectual property disputes, multi-million-pound shareholder disputes, drafting contracts and property disputes.

If you would like more legal advice on commercial arbitration or wish to discuss any of our services, you can contact us using the form below or telephone 02035765179 for a confidential discussion with one of our solicitors.

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