Court procedures are known to take decades to be over and the legal battle to secure rights does not end here for the parties as the verdict of the courts can be further challenged. By the time the litigation ends, parties are often scrapped off of their financial resources. This calls for a question of whether there is an alternative to the regular court proceedings.
Arbitration has emerged as an economical manner of dispute resolution in the past two decades. This post aims to analyse the pros of choosing arbitration as a method to resolve a dispute.
Costs
Analysing it from a common man’s perspective, the biggest vice of court procedures is the huge cost involved in it. The administrative fee of the court such as the court fee (levied according to the value of the suit) coupled with the fees of the lawyer always proves burdensome on the parties pursuing litigation in court. Further, the prolonged period of litigation often creates an extra liability on the parties with respect to their travel and other miscellaneous expenses. The hierarchy of appellate mechanism leads to all these expenses increased to multiple levels
Arbitration caps these costs as due to expedited procedures and fixed timelines. Further, the Arbitration and Conciliation Act, 1996 (“hereinafter referred as Arbitration Act”) has introduced the revolutionary ‘loser pays’ principle also known as ‘cost follows the event’ principle. In general terms, it means that the party who loses the arbitration has to pay the costs of the arbitration including the arbitrator(s) fees, legal fees and other expenses. Thus, it prevents the parties from bringing frivolous claims apart from reducing costs for the parties.
Time
The Arbitration Act requires the arbitral tribunal to make the award within 12 months after completion of pleadings and the parties may by consent extend this period of 12 months for a further period of 6 months. The fees of the arbitrator is liable to be reduced by 5% if dilatory tactics are used during the course of proceedings. Further, the conduct of the parties to delay the arbitration can also be taken into account while awarding costs at the end of arbitration.
Flexibility
Arbitration allows the parties to move away from the rigid and inflexible court procedures. While the parties are free to choose their arbitrator(s), they can also make decisions with respect to the venue, language, procedure, manner of obtaining evidence etc. Arbitration Act allows the arbitrator presiding over the case to depart from the Civil Procedure Code or the Evidence Act in terms of the procedure to be followed in the arbitration with the consent of the parties.
Experts as Arbitrators
The judges presiding over courts are often dealing with a diverse array of matters. For instance, commercial matters are often assigned to certain handpicked judges of courts. However, the division of matters, in reality, does not end here. Commercial matters may also have various subdivisions within them like construction disputes, maritime disputes, employment disputes, so on and so forth. Arbitration allows the parties to choose individuals other than judges to solve their disputes. For instance, an employer and a contractor, with disputes regarding non-completion of work on a building site, can choose to have an arbitrator with prior experience in construction like an engineer.
No Appellate Mechanism
Various Indian legislations provide for appellate mechanisms for the parties to challenge a decision of a lower court in a higher court if they are not satisfied with the decision of the lower court. Arbitration in turn reduces this possibility as a decision given by an arbitrator can be only challenged on limited grounds as provided under the Arbitration Act. Furthermore, courts have been mandated to not function as a court of appeal in the case a party brings a challenge to an arbitral award. Hence, the absence of appellate mechanism brings finality to a decision rendered by an arbitral tribunal.
Confidentiality
Matters in court are often decided in front of other lawyers/parties. This often erodes the confidential nature of some cases with parties facing a reputational risk. Arbitration, being a private forum, leads to the process of adjudication to be a private affair, thus, bringing the advantage of confidentiality into the picture.
Minimised Judicial Intervention
Arbitration Act provides that there shall be no intervention of the courts except in the matters provided under the Act. Thus, it leads to expeditious disposal of the disputes between the parties with minimum and necessary intervention of the court.
While these are some of the prominent pros of parties opting for arbitration instead of court procedures, there are certain drawbacks to this alternative dispute resolution mechanism as well. These drawbacks will be discussed in my next post. Stay tuned for more and understand your laws better!
