What Is Arbitration and How Does It Work?

In this article our agribusiness and disputes specialist Nina Winter explains the fundamentals of arbitration. Nina has recently been accepted as a Member of the Chartered Institute of Arbitrators (MCIArb) and is able to act for you in an arbitration or be appointed as an arbitrator. Her contact details are below.

What is arbitration?

Arbitration is a method of resolving a dispute between parties. If both parties agree to arbitration, an independent and neutral arbitrator is appointed and the arbitrator gives a decision on the dispute. The arbitrator’s decision is binding on the parties.

I’ve heard that arbitration is ADR; what is “ADR”?

Many disputes go to Court, but not all – sometimes the parties choose an “alternative” way of resolving their dispute. “Alternative dispute resolution” or “ADR” means resolving a dispute other than by going to Court. Parties choose ADR because Court proceedings can be lengthy and expensive, and there are strict procedural Court rules that the parties have to follow. Court proceedings are also held in public.

The parties might prefer to resolve their dispute privately, quickly, or with a view to saving costs. They might prefer a more flexible approach to the process compared to the strict rules of Court. That’s where ADR comes in.

The parties might choose mediation, for example, where the parties ask someone to help with their negotiations. But sometimes the parties want someone who is independent and neutral to given them a binding decision, having heard the parties’ arguments and seen their evidence, and that’s when the parties might choose to use arbitration.

How do the parties go to arbitration?

The starting point is that the parties have to agree to go to arbitration. They might agree to do so even before any dispute arises – quite often the agreement to go to arbitration will be in the original contract between the parties. But the parties can also choose to go to arbitration after a dispute has arisen.

How is an arbitrator appointed?

This should be set out in the arbitration agreement. The parties might choose to appoint an arbitrator between themselves, but more often the parties agree that a third party (e.g. the President of the Law Society, or the President of the NFU) will nominate or appoint an arbitrator. Sometimes the parties agree to appoint an arbitrator each and then a third arbitrator is nominated or appointed by a third party. Sometimes the parties choose an institution to administer the arbitration (e.g. the Chartered Institute of Arbitrators) and in those cases the institution will appoint the arbitrator.

Sometimes the parties specify the type of arbitrator they are looking for – perhaps they want an arbitrator who has a particular technical expertise, like an agronomist; or perhaps they want an arbitrator who is legally qualified. Ultimately if the parties don’t agree on a process for appointing an arbitrator, the Court can appoint an arbitrator if necessary.

However the arbitrator is chosen, it is important that the arbitrator is neutral and independent of the parties.

What’s the process for the arbitration?

That’s up to the parties. A key attraction of arbitration is that the parties can choose the process that they want to follow. If the parties have already chosen an institution to administer the arbitration, they will follow the arbitration rules of that institution.

If they have not chosen an institution to administer the arbitration, they have what is called an “ad-hoc” arbitration and they can choose the rules they want to use which will set out the process to be followed. They can for example choose to use a particular organisation’s arbitration rules, such as the AIC Arbitration Rules.

If the parties don’t agree on a procedure for the arbitration proceedings, then it will be for the arbitrator to decide the most suitable procedure for the case. Ultimately the arbitration process will be governed by the law of the “seat” of the arbitration; the Arbitration Act 1996 underpins all arbitrations where the seat of the arbitration is in England and Wales.

What happens in the arbitration?

Depending upon the arbitration process that the parties have chosen, normally the arbitrator would hear arguments from both parties, consider evidence submitted by both parties and then come to a decision. There is usually a hearing but the parties can decide to have an arbitration based entirely on documents without a hearing taking place.

The arbitrator’s decision is called an award. The award is binding on the parties meaning they have to comply with it. This is one of the key reasons parties may choose arbitration over other forms of ADR; they get a certain and binding decision at the end of the arbitration.

What happens if one party ignores the award?

An arbitrator’s award is legally binding and in England and Wales a party can ask the Court to enforce the award if the other party ignores it. The Court will give a judgment in line with the award and that judgment can then be enforced against the other party.

How much does arbitration cost?

That depends! Although the parties have to cover the costs of the arbitration (including the arbitrator’s fees) and their own legal costs, the arbitrator can order one party (usually the losing party) to pay the other party’s legal costs and the arbitration costs. The parties can choose a procedure that’s quicker and more streamlined than Court proceedings, so arbitration is often seen as being cheaper than Court proceedings. That does depend on the nature and complexity of the dispute, though.

If you’d like to know more about arbitration, please contact Nina on 07826 201 576 or nmw@prospectlaw.co.uk.

About the Author

Nina Winter is a Senior Solicitor with 16 years post-qualification experience in litigation and dispute resolution, with particular expertise in judicial review challenges to government and public body decisions and an established reputation as a legal expert in the agricultural industry. Nina read law at Oxford University before training and qualifying at Eversheds, where she worked as a commercial litigator on contract disputes, IT litigation and product liability cases. In 2006 Nina joined the legal team of the National Farmers’ Union (NFU), the leading trade association representing farmers and growers in England and Wales. In 2009 Nina was appointed as the NFU’s Chief Legal Adviser, a position she held for 12 years before joining Prospect Law. Nina’s practice at the NFU included litigating disputes in the High Court, Court of Appeal, Supreme Court, EU General Court and the Court of Justice of the EU. Nina has an in-depth experience of judicial review claims, as well as experience advising on competition law, defamation, contracts, negligence, nuisance, harassment, environmental law, water law, insolvency, animal law, planning, utilities and FOIA/EIR. Having worked as in-house counsel for 14 years, Nina is able to quickly identify the legal issues at stake and to work pragmatically and seamlessly as part of a team to achieve the client’s objective. Nina’s expertise in agriculture means she brings a comprehensive understanding of the issues facing agri-businesses to her legal work. Nina was appointed as a Deputy District Judge to the Midlands Circuit in 2019. In her practice with Prospect Law, as well as dispute resolution work for clients, Nina offers a virtual in-house legal service to agri-business clients wanting on-demand, responsive and pragmatic advice, without having the expense of running an in-house legal team. Nina is also available to work as a consultant alongside other lawyers seeking to bring in-depth agricultural expertise to complement their work for agri-business clients.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

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