Five Considerations in Choosing to Arbitrate Rather Than Litigate Your Commercial Dispute
The following are the typically cited advantages of arbitrating a dispute where the opposing parties are in different jurisdictions. Some of these considerations also apply to domestic disputes in specific sectors, notably, the construction industry.
1. Neutral Ground: Some opposing jurisdictions are better understood than others: the laws of Canada and the United States, for example, vs. the Canada and China or Russia. Nevertheless, even a court system similar to your own isn’t your own and the same discomfort will be shared by an opposing party. It follows that an arbitral tribunal may provide a neutral forum more comfortable for both parties, the situs of which can also be determined by the parties in favour of a neutral jurisdiction each side has confidence in.
2. Judges of Your Own Choosing: Apart from the usual attributes of demonstrated achievement, experience, intelligence and integrity which should be apparent from an arbitrator’s resume, specialized knowledge and experience may also be a desirable and even critical element for a third-party decision-maker to reach a fair and just resolution of the dispute. This is often a very critical element in fields such as construction, mining, energy, and specialized manufacturing. National courts can seldom offer any prospect of specialized competence in the judge(s) appointed to hear your case.
3. Confidentiality: For some parties, this is the most important reason for choosing to arbitrate. Courts and the cases they hear are matters of public record and subject to public access and publicity. It is often in the best interests of both sides in a dispute not to run the risk of confidential or proprietary information on which commercial advantage depends being aired on either side. Arbitral proceedings are confidential at the behest of those invoking them and cannot be waived unilaterally by either side once the agreement to arbitrate has been concluded.
4. Cost, Speed and Efficiency: It is a uncommon misperception that it is always less expensive to arbitrate than litigate. Arbitration entails the parties paying for their judges, facilities for adjudication and all requirements incidental thereto. National courts maintained by public money assume most of these expenses. However, recent advances in communications technology – the ubiquitous “Zoom” meeting or other such service – has mitigated at least a portion of the costs associated with arbitration. It is also generally true that a well-managed arbitration in which both parties also cooperate with each other and the panel they have appointed, is generally faster and more efficient than either awaiting a court date or the subsequent court battle. A good panel operating under a well-drafted agreement to arbitrate may serve to quell a lot of gamesmanship associated with litigation.
5. Enforceability: This is another critical advantage favouring international arbitration that disciplines the enforcement process for all jurisdicitions that are party to where, the United Nations Convention on the Recognition and Enforcement of Arbitral Awards, dating from 1958, commonly called the “New York Convention”. One hundred and fifty-seven states have bound themselves to this treaty, including every state in the G20. The New York Convention provides a virtually universally available level playing field for the enforcement of international arbitral awards, precluding defences to enforcement based on the merits of the dispute already decided by the arbitral tribunal. Defences are narrowly focused on considerations of procedural fairness as between the parties and the tribunal, jurisdictional error by the arbitral tribunal in the exercise of its mandate, and fundamental error due to fraud. Domestic enforcement legislation in Canada and many other jurisdictions replicate many of these advantages.
Arbitration is not for everyone and certainly not the preferred forum for every dispute, At the same time, however, even in the absence of an agreement to arbitrate in advance, commercial arbitration should not be dismissed out of hand.