Business Law Articles
By: Reinier W.L. Russell, Esq.
Russell Advocaten B.V.
Arbitration is a less well-known but effective way of dispute resolution. In the following we will therefore list 7 things you should know about arbitration.
1. Easy to arrange
Arbitration is non-public administration of justice. The parties can agree mutually not to submit a dispute to the regular court but to one or more arbitrators. This can be done before a dispute has arisen, for instance, in General Terms & Conditions, or when a dispute has arisen, in a specific agreement.
Arbitration also offers outcomes in international and commercial disputes. Thus, the Permanent Court of Arbitration in The Hague has recently rendered a decision on a dispute between Russia and the shareholders of a nationalized Russian oil company. The Russian government has to pay back 50 billion USD (EUR 37.2 billion) to the shareholders.
3. Parties have more influence
In arbitration proceedings the parties can agree on many things beforehand, whereas the regular court is bound by the statutory rules of procedure. Thus, agreements can be made on the number of arbitrators and the language used in the proceedings. The parties can also decide on the arbitral rules to be applied and before which institute the proceedings have to be held, for instance, the Netherlands Arbitration Institute (Nederlands Arbitrage Instituut, NAI), the International Court of Arbitration of the International Chamber of Commerce (ICC), the Permanent Court of Arbitration (PCA) or the Court of Arbitration for the Building Industry in the Netherlands (Raad van Arbitrage voor de Bouw, RvA). If a dispute is submitted to the institute of choice, the parties themselves may appoint the arbitrators.
4. Specific expertise
Arbitrators are usually lawyers and/or specialists from the sector. They have the same legal authority as a judge and, in addition, have thorough professional expertise. This extra knowledge ensures that the parties can clarify their (legal) problem more easily and will more easily agree with a decision afterwards. A regular judge often has to appoint a specialist in order make a proper assessment of what is going on, which involves additional costs.
5. Fast and less formal
Arbitration proceedings are less formal, and therefore they are usually shorter than court proceedings. Arbitrators are not bound by the strict rules the regular court is bound by. The focus is on oral hearings and therefore the parties get the chance to have their say.
A dispute which is settled by arbitration will be treated more confidential than a dispute before a regular court which, in principle, has to treat disputes in public. Therefore, outsiders will not be able to find out easily that certain parties have a dispute and neither can they attend meetings.
7. The decision is binding, even abroad
A decision by arbitrators has the same legal effect as a ruling by a regular court. Another benefit is that an arbitral award can be enforced in about 150 countries across the world, whereas a ruling by a Dutch court can only be enforced outside the EU if there is a treaty on the enforcement of judgments between the Netherlands and the country in question, which often is not the case.
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