What is Arbitration?
Arbitration is a flexible method of dispute resolution which can provide parties with an efficient, confidential, fair, final and binding resolution. The arbitration is conducted in accordance with the terms of the parties' arbitration agreement which is usually found in the provisions of a commercial contract.
Arbitration is a consensual dispute resolution process where the parties agree to submit their disputes to be resolved by an arbitral tribunal composed by arbitrator(s) who is/are independent third party/parties appointed by or on behalf of the parties in dispute. Arbitration awards will be final and binding.
Types of Arbitrations
- Institutional Arbitration
Institutional arbitration proceedings are administered by an arbitration institution, such as the HKIAC. Typically, proceedings are conducted under the arbitration rules devised by each institution, for instance, the HKIAC Administered Arbitration Rules.
- Ad Hoc Arbitration
Ad hoc arbitrations are arranged solely between the arbitrators and the parties. They may adopt a ready-made set of arbitration rules (such as UNCITRAL Rules of Arbitration) or be conducted under the rules drawn up by the parties.
Major Advantages of Arbitration
- Flexible
Arbitration permits the parties to agree on arbitration proceedings procedures.
- Neutrality
Parties are free to choose a neutral arbitral venue when drafting arbitration clauses. Also, parties can have the autonomy in appointing independent arbitrators to form a neutral tribunal.
- Enforceability
Enforcement of foreign court judgments can be difficult in the absence of an appropriate bilateral treaty. Under the New York Convention signed by more than 140 jurisdictions, each of the Convention party undertakes to recognise and enforce arbitral awards made in other signatory members.
- Final and binding
Arbitration awards are usually final and not subject to review on the merits. That means prolonged court appeal procedures can be avoided.
- Confidential
Arbitration hearings are conducted in private and awards are, under normal circumstances, not published. Therefore, disputes will not be revealed to the public and healthy business relationship can be maintained.
- Time and cost-efficient
Litigation is often time consuming and costly. Arbitration procedures are relatively flexible and awards are final and binding. Though it is no guarantee that arbitration is invariably quicker and cheaper than court proceedings or other means of dispute resolution, many disputes can be resolved by arbitration more quickly and cheaply.
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