What do I mean by “domestic arbitration”?
I am referring to arbitrations in the UK where there is a single arbitrator. These will often be commercial arbitrations where there is a dispute between two businesses, or under a Professional Appointment, or within a partnership, or between shareholders or directors in companies. Disputes under construction contracts have, in the past, produced a lot of domestic arbitration.
Domestic Arbitration in the Doldrums
We have entered a very quiet period for domestic arbitrations. People are simply not using arbitration as much as they did to resolve their disputes. It can be said that they have turned their back on arbitration. The question is – “why?”
I stress that I am interested in solutions – not problems. But the past is often the key to the present.
Arbitration in the ’80’s
Much of the damage to the reputation of arbitration as a dispute resolution model results from the way we arbitrated in the 1980’s.
In many ways, arbitration has been “saved” by the Arbitration Act 1996 which legislated for speed and cost effectiveness and for the parties to arbitration to have freedom of choice in the way they arbitrate.
Unfortunately, by that stage, the damage was done.
It is easy to blame the previous generation of arbitrators. That is not particularly helpful.
What we can say is that by the end of the 1980’s, we had had a period where arbitration had become too expensive, taking too long and it was too close to the Court system and overly legalistic.
This was due a combination of things:-
- By the ’80’s we had moved into the Thatcherite area. Solicitors had lost their conveyancing monopoly. This prompted a response from lawyers along the lines of “we will show you”. Lawyers were determined to show that they were highly educated, clever, resourceful people who could generate good incomes for themselves.
- Thatcherism produced many benefits. It also began to generate a culture which was strident and money-focused.
- Thatcherism coincided with a period when big and colourful personalities ruled the roost. It was an era which welcomed and enjoyed drama – perhaps more than we do now.
- None of this sat well with the business of arbitration, which predominantly requires a private, swift, cost-effective procedure, managed by modest, dedicated arbitrators with the minimum of fuss, at a reasonable cost.
- During the ’80’s, arbitrations could easily last 4 or 5 years. Costs were eye-watering. Arbitrations were conducted like major court cases. Some arbitrators had private planes or helicopters.
- Leading arbitrators were often big personalities and some took a black and white, dogmatic approach.
- I recall being told during training as a young would-be arbitrator, to make awards which clearly and emphatically came down on one side or the other. I recall thinking, at the time, that most arbitration disputes I had seen were not black and white and were nuanced with subtle shades of grey.
- After the drama of the arbitration was done and the huge costs and expenditure of resources were counted, frequently the parties would be severely disappointed with the whole process.
The main lesson of the past is that delay is the enemy of arbitration. So fast track procedures are needed.
One party – the claimant – often wants to go quickly whilst the other – the respondent or defendant – wants to go more slowly.
Fixed period arbitrations such as “The 100 Day Arbitration” can be the solution.
It can be agreed in the arbitration rules in the parties’ contract that the arbitration period is fixed, or that the arbitrator, at the first directions hearing, will fix the period of the arbitration. It can be agreed that the arbitrator can award limited extensions. For example he can award up to two extensions, limited to a total of 14, or 21 days.
There can be a series of options for the arbitration process – to be agreed between the parties at the start of the arbitration, or in the absence of agreement left to the final choice of the arbitrator.
Options could include:-
- All submissions to be on paper and subject to a tight timetable of, say, 28 days, with the ability to extend it by 14 days.
- Written submissions followed by a hearing with limited oral submissions but no expert evidence.
- A procedure involving a formal oral hearing – but with the date fixed at the first directions stage.
- In all but exceptional cases submissions should be by way of a statement of case with the relevant documents attached. There should be no formal disclosure of documents stage but a right to request documents from the other side, with the arbitrator having power to decide that documents be provided and to award penalties if they are not.
The best way to control costs is a speedy and closely-managed process.
Arbitrators should have the right to cap the recoverable costs. The arbitrator should always have power to assess costs and to award only proportionate costs
The parties should be required to provide cost schedules for the different stages of the procedure in advance, in arbitrations of more than two months.
Arbitration rules can provide that the arbitrator receives a fixed fee for a shorter arbitration. For longer arbitrations, the arbitration rules can provide that the arbitrator provides fee ceilings for each stage of the arbitration, with a maximum percentage increase for unexpected work.
The on-site Arbitrator
There is a no need for arbitration for be retrospective.
So, in construction arbitrations, the building contract can name an arbitrator and the parties then enter into an agreement with that arbitrator that he will attend site when required to resolve disputes as the project progresses. Further arbitrators can be named, to step in if the first arbitrator is unavailable.
We can get back to the immediacy of the old “look/sniff” arbitrations, where competent arbitrators made decisions then and there.
Arbitration is not dead. It simply needs effective forethought and management. It can then be as effective and dynamic as you want it to be.