Make an Informed Choice – Part I
Parties choosing to get their disputes resolved through the alternative dispute mechanism arbitration are often vexed with the question whether they should resort to an arbitral institution administering their arbitration or should go for ad-hoc arbitration and manage everything themselves.
If your contract contains an arbitration clause laying down that the arbitration shall be administered by an arbitral institution, it is an Institutional Arbitration. Ad Hoc Arbitration is arbitration agreed to and arranged by the parties themselves without assistance from/recourse to an arbitral institution.
India has experienced the advent of many arbitral institutions such as Delhi International Arbitration Centre (DIAC), Mumbai Centre for International Arbitration (MCIA), Nani Palkhiwala Arbitration Centre (NPAC), International Centre for Alternative Dispute Resolution (ICADR), etc. in the last decade. While there are many advantages of the institutional arbitration regime, it is not devoid of demerits due to which parties often opt to resolve their disputes through ad hoc arbitral tribunals.
This series of blogs delves into the nuances of choosing institutional arbitration or ad hoc arbitration.
It is unquestionable that institutional arbitration has provided an invaluable opportunity for the growth of arbitration. Global arbitral institutions such as ICC, SIAC, HKIAC, AIAC, LCIA have been the most attractive spots for parties to submit their disputes for arbitration.
The adoption of special arbitration rules formulated by these institutions coupled with constant and close supervision by the institutions has helped the parties believe the benefits of arbitration. Some more benefits of institutional arbitration are listed below:
- Availability of set of pre-decided arbitration rules which have been formulated as a result of analysis of parties needs and demands.
- Rulings of arbitrators serving under respective arbitral institutions serve as a precedent on the matters which follow that ruling. It also acts as a guide for practitioners/counsels arguing a similar factual situation. It has also increased the predictability of decisions of the tribunals.
- Institutional Arbitration has provided the infrastructure for arbitration both in terms of rules and in terms of physical space to carry out the arbitration.
- Review of arbitral decisions by an internal committee of the arbitral institution promotes standardization of award and works as quality control.
To sum it up, it can be said that institutional arbitration attempts to reduce the apprehended demerits of the arbitration being an informal procedure. So next time when you are entering an agreement and drafting the dispute resolution clause, do keep in mind aforesaid factors while choosing the forum for arbitration. We will continue discussing on this issue in upcoming series on this issue.
