Arbitration
Arbitration process allows faster and cheaper dispute resolution without the need to follow court procedures. In this process, the arbitrators replace the conventional judges and the juries in the decision making (Stoppi, 2001). It is fully the responsibility of the arbitrators to decide if the violation against the business really occurred and how compensation and the correction process will be effected.
The rationale for arbitration
The international business communities have turned to arbitration as a way to resolve disputes because once the arbitration is done, the arbitrators decision is final. The decisions made during the arbitration process are not subject to any appeal even if one party does not find the decision made to be satisfactory. However, in rare situations, when one can substantially prove that the arbitrator was biased, the arbitrator decision can be challenged (Marshall, 1992). The challenge is often done within the first three months and any thing more than the duration is never considered. The challenge is called the motion to vacate.
Investors or business entities access a brokerage account and automatically sign an agreement requiring a broker to settle all types of disputes through arbitrations rather than the traditional way of court procedures.
In order to be successful in arbitration process, it is important to consider the factor of time. Legal actions should be taken promptly or else the right to recover the lost funds or to be compensated may be lost. There is a provision for time limitations called statutes of limitations and this provision is not the same but keeps on varying from one state to another. For instance, the laws of federal securities require that court actions to be brought within two years of the exact time of discovery of violation. The provision does not provide for any delay and if wrongdoing is reported after five years, the case is regarded as null.
Arbitration in the Federal Law
In every state or a federal there are statutes which may pose limitations to the normal operations of the arbitrators. Prior to their operations, the arbitrators first consider if a claim is a violation of laws governing either a federal or a state (Jean, 2000). It becomes difficult to pursue a case if it has lasted more than six years under the laws of arbitration.
The initial filing of arbitration is done by the Financial Industry Regulation Authority Dispute Resolution. Other claims may be filed with the exchanges like the New York Stock Exchange (NYSE). Simpler arbitrations may require a person to appear in person at a hearing. Simpler claims are characterized by their money value of less than USD 25,000. In this scenario of simplified arbitration, the arbitrator makes a decision on the case by rigorously reviewing the documents and any written detail presented to him about the real incident from both the broker and the claimant (Gold, 2008). This may seem a cheaper option since there may not be a need to travel and appear in person for a hearing or give testimonies or answer any questions that may be posed.
The concept of mediation in arbitration
Prior to arbitration, individuals may consider mediation. The mediation may make it possible for one to save time and finances since this method is faster than even arbitration. It has also been argued that mediation is less confrontational than arbitration itself. However, individuals are advised to seek arbitration in case mediation does not bear any significant fruit. It should be noted that the decision to arbitrate needs some consideration. Sometimes a broker or brokerage firm that is representing an individual may be declared bankrupt or may go out of business. When this happens, there is a possibility that recovery of an individuals money may turn almost impossible. The recovery of money will be impossible even if the court or the arbitrator makes decisions in favor of an individual (Deitsch, Dilts, 2001). Therefore, it is of importance for an individual to investigate the brokers disciplinary profile. The same should be done to the brokerage firm before any sort of investment.
It is not mandatory to hire a lawyer to represent an individual in arbitration. Especially if an individual has small claims (less than USD 25, 000), he can opt to take an option of utilizing arbitration or mediation clinics offered by most law schools especially those in the United States in New York, Illinois, California and Pennsylvania.
American Arbitration Association (AAA)
In the United States, the American Arbitration Association (AAA) is committed to provide assistance to parties in matters of dispute resolution in international standards. To achieve international class, the AAA has set up the International Centre for Dispute Resolution (ICDR) which is charged with a responsibility for exclusive administration of all the international issues of the AAA (Bandaw, 2005).
The experience of the ICDR with its international expertise and multilingual staff make it a center for dispute resolution procedures. The international system at ICDR is based on the capacity to progress matters forward in fast ways which may not be the same in some other courts. Communication in the ICDR is highly facilitated with a sharp sensitivity and understanding of cultural difference. The ICDR ensures that only qualified mediators and arbitrators are appointed and the costs are highly controlled making access easy. There is also a proper interpretation and application of rules of mediation and international arbitration. A cooperative agreement exists between the ICDR and several international arbitral institutions, which facilitates the ICDR in administering the international disputes (Anderson, 2002).
The ICDR has improved services to clients and the business clients can file their cases under particular rules allowing clients to select where the dispute will be arbitrated and as well as providing the means of choosing a skilled mediator or arbitrator who is not only competent in arbitration but also possesses relevant and desired communication skills.
There is also another international organization concerned with matters of arbitration, called the Permanent Court of Arbitration (PCA), located in Hague, Netherlands. Although it is mistakenly perceived as a court, it is not a conventional one, but rather an administrative organization whose aim is to provide a permanent and easily accessible registry for the aim of international arbitration or other procedures related to it which may include conciliation and commission of enquiry. PCA is a permanent framework which is easily accessible to help temporary arbitral hearing and commissions (Stoppi, 2001). The PCA is open to both to the states and other parties which makes it convenient for everybody. This means that the PCA has a mandate to offer arbitration services which resolve disputes among several combinations of states, individual states, private individuals and intergovernmental organizations.
PCA is more or less mandated in handling cases which arise from international treaties which may include the bilateral and multilateral investment treaties. At the same time, the PCA administers disputes arising from other agreement to arbitrate. PCA does not only handle cases of arbitration but also a wide class of disputes. The most common case that PCA handles includes legal issues which mainly consist of territorial and maritime disputes over boundaries. In the business and trading sector, the PCA offers international investment support and international and regional trade handling of issues.
Advantages of arbitration
Confidentiality is to the utmost the hearing is never open to the public nor the decisions exposed. The decision by the PCA to keep hearing and decision secret is provided at the request of the involved parties.
The confidential nature of arbitration is one of the reasons why the business community has become more attracted to its use in resolving their disputes. In most cases, arbitration involves the resolution of disputes through an impartial adjudicator. This adjudicator derives decisions from both the parties whatever they decide is what the adjudicator will stick to. This makes arbitration to be far different from mediation, expert determination, judicial proceeding and alternative disputes resolution (Jean, 2000). The word arbitration has sometimes been used to refer to the court or judicial proceeding.
There are many reasons why parties seek the arbitration procedure in dispute resolution. These benefits of arbitration surpass the court or judicial proceedings. For instance, in situations where the subject matter is very technical, the arbitrators who have considerable amount of expertise may be selected for some interventions. Arbitration is also important as it offers faster services than even the litigation process in the court procedures. The flexibility and the low cost of seeking arbitration has attracted a wide rang of business to consider the procedure to be effective in solving business disputes.
All procedures and awards of arbitrations are purely confidential, which means that the parties involved retain some measure of privacy from the public, regarding the resolution of the dispute. This makes most parties to seek arbitration. The arbitration awards are easier and quicker to enforce because of the provisions by the New York Convention. The reverse is true when it comes to the court judgments which are very hard to enforce in many states (Gold, 2008). Most legal systems have limited options for appealing of an award offered by arbitration. This gives people seeking arbitration some kind of immunity over court hearings and judgments.
Drawbacks of Arbitration
The arbitration method of resolving disputes presents several advantages which attract parties and state to seek the procedures, however such benefits also require the imposition of some limitations. Some of these involve lack of clarity. In most cases, arbitration agreement is contained in ancillary agreement. Sometimes the agreement is contained in a small print within other agreements. This makes the consumers and employees not to be sure whether they have already agreed to compulsory binding the pre-dispute arbitration by buying a product or taking up a job (Bandow, 2005).
The two parties seeking arbitration have to put aside their rights to access the courts in case the arbitration is compulsory and binding. This means that they have to involve a judge or a jury to decide the case and give possible remedies. This limits the free nature of arbitration although this happens in few incidents.
The recovery of the attorneys fees cannot be traced or is practically unavailable. This happens typically in some arbitration agreement and systems. The impossibility to recover the attorneys fee makes it difficult for employees or consumers to have access to legal representation. However, majority of arbitration agreement and codes provide for the same relief which can be provided for by in courts.
There is a possibility of a natural incentive to rule against the employee or a consumer if the arbitrator or a forum of arbitration fully relies on the corporation for repeat business. Another limitation presented by arbitrations procedures is that there may be very minimal ways to make an appeal. This implies that flawed decisions are not easily reversed.
The arbitration process is believed to be fast. However this is only possible if there are many arbitrators on the panel. If there are few arbitrators, the process may seem to be very slow. This especially happens when arbitrators are attempting to juggle their schedules for hearing dates in long cases may pose very long delays.
Arbitral awards tend to have less enforcement remedies than the judgments in some legal systems. An exception is the United States where arbitration awards are enforced in a similar manner like those in courts. The arbitration judgments and all procedures may resemble those in courts and may take similar effects.
One of the most serious limitations of arbitration is that the arbitrators are often not able to enforce interlocutory steps against one party. This makes it easier for another party to take measures in order to evade enforcement of an award. The steps which one party can undertake include the repositioning of the assets offshore.
The arbitrators are never governed by the rule of applicable law. This does not mean however that they are to disregard the law. There is a claim the discovery is limited when it comes to arbitration. This could mainly be due to lack of rigorous processes as opposed to court procedures.
There is a low potential for attorneys to generate billings as compared to pursuing the disputes through court procedures or trials. The arbitration awards are never independently enforceable unlike court judgments. This implies that a party seeking to enforce an arbitration award has to resort judicial solutions which is known as an action to confirm an award.
In arbitration, the foundations for attacking an arbitration award are limited although the measures to confirm the awards can be sought with great effort. The great efforts invested usually causes huge expenses in seeking legal justice. This negates the alleged economic inducement to arbitrate the dispute in the first place.
Not all cases are arbitral. This can be caused by the nature of cases making arbitration process not to apply. Generally, there are two groups of legal procedures which can never be subject to arbitration those that lead to a determination which the parties may not agree upon and those that legal orders exempt or restrict the arbitration possibility for the purpose of providing immunity to the weaker parties like the consumers.
In cases where the procedures lead to a determination which the two involved parties in the dispute do not agree upon, the arbitration will be null. Some procedures in courts may have judgments which bind generally all members of the public or the public authorities in their capacity for their interest. This way both parties are favored. Some of the cases which were not arbitral included the antitrust matters in the U.S. Similarly, crime related matters, status and family law are never considered arbitral. This is because the power of the parties to enter into an agreement has defined boundary (Marshall, 2004). However, some of the disputes which involve two parties with private rights may be resolved by arbitration procedures. It is also to find that some cases have different segments.
Difficulties encountered in arbitration law
Some parts of the claims can be handled using arbitration procedures while others cannot. For instance, a dispute of infringement into patented product can have two sections. The first part is the validation of the claim that an infringement into patented product has been done and this can be handled by arbitration. The other section of the case is the real validation of the patent which cannot be done by arbitration. This is because patents are subject to a procedural system of public registration. Therefore, the arbitral panel may have little to do to demand the involved body to correct any patent registration which is based upon its ruling.
The second exception where arbitration may not apply is when the legal order exempts the propensity of arbitration. The legal order may make these provisions to protect the weaker individual in the society such as consumers. Germany, for instance, has laws protecting the tenants from disputes over the renting of the living space from arbitration interference. Arbitration agreements with consumers in the same country are only valid prior to signing by either party (Brams, 2003). This is also applicable only when the documents that are signed do not bear other contents other than the agreement of the arbitration.
In arbitration, there are some crucial procedures that have to be carried out. One of these most essential procedures is the making of arbitration agreement between the two parties. Theoretically, arbitration is a consensual process which a party cannot be forced into unless he agrees to make a fully consensual agreement. The theoretical perspective seems to differ from the practical aspect.
Majority of arbitration agreement are made on settings where the employees and consumers have little or no bargaining power. In addition, arbitration clauses have always been written and sealed deep within the user manuals which are provided when purchasing products. The products can be tangible or intangible ones and both of these come with the arbitration clauses deep hidden and not easily to view (Amazu, 2001). When these agreements are contained in the websites, they often involve a number of clicks before reaching the consumers. In some other situations, the consents do not make much sense.
The arbitration agreements are divided into two broader categories. Agreement that disputes should always be resolved by arbitration and the agreement that is formulated after a dispute has already occurred. Normal contracts but with arbitration clauses represents the first type of agreement. The second type can also be termed as submission agreement which state that arbitration shall only be applicable in situations after a dispute has arisen.
Most business communities and consumers may give support to the second type of agreement of arbitration. However, the legal significance dictates on the choice of arbitration agreement to be taken. For instance, some countries belonging to a Commonwealth have a provision that each individual party has to bear the costs in a typical arbitration clause. This however does not apply to a submission agreement.
State laws have been keen in keeping with the informality of entire process of arbitration process. These enactments in various states and nationals uphold the principles of arbitration clauses even in situations where the normal formal language which is associated with legal contracts is lacking (David, 2009). State laws have validated the process of arbitration despite the apparent weakness. Examples of these clauses have been adapted by the London where the English law is said to apply, sometimes calling it suitable arbitration clause.
In a number of states, the courts have upheld those clauses that specify the dispute resolution other than the conventional methods following the particular system of legal provision. For instance, there is a provision which states that the arbitrators must not necessarily make decision based on the strict law but rather on a general ruling which takes into consideration the laws of practical business (Anderson, 2002). Another provision states that arbitration procedures should be based on the internationally accepted principles of law governing the contractual relation.
The consensus to forward the disputes to arbitration process has a special status before the law. For instance, in a dispute involving a contract, the most likely defense mechanism is to plead that the contract is void and therefore any claim that will be based upon it will automatically be null and void (David, 2009). This always follows that if one of the parties claims that the contract is void, then all the clauses in the agreement will be declared void.
Benchmarks of arbitration
To bring some uniformity in arbitration, there are generally accepted principles governing the process of arbitration. These laws have been identified to encourage some criteria which can help make judgments on empirical basis and considering different countries. There are laws governing the arbitration agreement, arbitral tribunal and its proceedings, substance of the dispute and finally the laws recognizing and enforcing of the award.
There are several problems associated with the litigation of foreign jurisdiction. These problems are not new but have always been encountered in the past. There have been enormous efforts to provide a workable arbitration substitute internationally. One of the most notable efforts was that made by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards also called the New York Convention in 1958 (John, Alexander, 2005). The Convention endows with that each signatory nation shall be recognizable with arbitral award as binding and put them into effect according to the territorial rules where the award is relied on under the conditions specified in the Convention.
The arbitral award
The adoption of arbitral award was very difficult for most countries after the Convention. Majority of foreign tribunals became disinclined to recognize arbitral awards rendered against their nationals. Further still, majority of foreign tribunals did not have the legal framework to credit the awards (Brams, 2003). Currently, several nations have signed the Convention although the U.S ratified it in 1970 but later enacted it as Chapter Two of the Federal Arbitration Act.
Arbitration process benefits both the domestic and foreign parties and individuals. The jurisdiction reach of arbitration is diverse since it applies to all international businesses. For a party or individual to be recognized as international, the parties should be diverse internationally. It may also necessitate that the place of arbitration should be outside the country of the parties or individuals presented.
A case example is the new Illinois International Commercial Arbitration Act (ICAA) which has no court intervention except when provided for by the ICAA. The judicial intervention, under the ICAA is only permissible to appoint neutrals, determine jurisdiction and decide possible challenges (Amazu, 2001). However, the judicial interventions are not subject to any appeal. This means that the final and binding nature of the permissive court interventions is made on purpose to break an impasse in an arbitration to enable it proceed as the two contracting parties expected.
During the dispute, the parties should start the process of arbitration without the court intervention. In case of a party filing a complaint under some court jurisdiction, the ICAA will then direct the courts to advise the parties to start the arbitration process. This is possible as long as the defendant have sought to initiate the process of arbitration but not later than the first substantive pleading.
The ICAA concurrently does the envision arbitration together with the court actions. . Further still, the ICAA provide that the court may take a step to provide an interim measure of protection. This can be done before or during the arbitral proceeding (Wheeler, Mahony, 2004). The interim measure of protection refers to the equitable solutions like injunctions or protective orders. The arbitral tribunal has also the authority to order the same remedies.
Conventionally, there is a single presiding arbitrator. Unless the parties make a ruling, the circuit court of a particular county has full authority for this function. In situations where parties contract three arbitrators and at times fail to reach a consensus, the ICAA will grant that each party appoints one arbitrator while the two arbitrators will appoints the third one (Mario, Charles, 1999).
The arbitrator must expose any aspect which is likely to cause justifiable doubts. This should be done without any partiality or dependency on anything. Any of the two parties has the capacity to challenge the arbitrator decision. The tribunal law has authority over its own jurisdiction over the claims and it is to determine the rules of pretrial or trial procedure. The tribunal will also determine the place of arbitration, the language to e used and the possibility of oral hearings.
Sometimes a respondent fails to file a statement of defense. If this happens the tribunal shall proceed with the proceedings without blaming the failure. The ICAA through it experts, provides a hybrid between the continental legal system and the American communities. The tribunal may need a party to supply the expert with the necessary information and documents in order to assist in the process (Miachael, 1992). That is distinctive in continental and civil law countries whereby the tribunal takes a more rigorous approach.
Conclusion
As the international business community continues to experience enormous growth, it becomes even more critical for business disputes to be resolved in the most efficacious manner possible. The challenge is to expedite such resolutions in such a way as to not bog down the existing legal infrastructure and the relevant judiciary institutions. By making use of arbitration services, one can significantly reduce the pressure experienced by lawyers in resolving disputes between parties both foreign and domestic, especially in a business climate where contracts that engage companies of different legal and geographical origins.
Additionally, arbitration is fully recognized by federal and international law, which means that it allows parties concerned to find a solution to their disputes that is not only recognized by the law, but legitimized and enforceable. Furthermore it provides a degree of privacy and confidentiality that is not normally accorded to such parties under the auspices of the courts.
However, for the use of arbitration in resolving disputes to continue to be effective, it must be held accountable to various standards and scrutinized thoroughly for the deficits it may incur in dispute resolution. Arbiters must possess relevant expertise to the dispute at hand, and therefore require the kind of specialization that most judiciary entities do not possess. As such, arbitration should not be mistaken as a substitute court, but rather a means by which to address the peculiarities of certain disputes that make them
so difficult to resolve in the first place.
However, arbitration services do not apply to all kinds of disputes and therefore have limits to their use. Furthermore, legal precepts written into the existing law may give primacy to certain individuals and parties that curtail the power of arbitration, for example a resolution may legally require that the weaker individual such as consumers or tenants, must be favored in the overall ruling.
In any case, the emergence of arbitration over the past century has provided much relief to the courts and its future lies in the means by which its efficacy and enforceability may be improved without unnecessarily abrogating the power and responsibilities of the judiciary and by continuing to act in concordance with existing legislative mandates.
Categories:
0 comments:
Post a Comment