Ad Hoc v International Arbitration

Introduction

International arbitration remains the preferred dispute resolution mechanism for crossborder disputes for major international corporations. In industries such as shipping, energy, oil and gas and insurance, international arbitration is the most commonly used dispute resolution mechanism.

The immediate benefits to international arbitration have been cited as enforceability of arbitral awards, the flexibility of the procedure and the depth of expertise of arbitrators as the major advantages.

From research undertaken on this matter, the organisations who prefer ad hoc arbitrations are corporations with a gross annual turn over of more than $50 billion. Such organisations are likely to have large, sophisticated in-house legal departments with experience of managing arbitration proceedings.

This article will consider ad hoc versus institutional arbitration provisions, and describe the new institutional arbitration option now available in Bahrain.

Ad Hoc Arbitration

Quite simply ad hoc arbitration is where parties agree upon a form of arbitration that is specific to a particular contract or dispute, without referring to any arbitral institution. The parties may choose (in contract negotiations or following the crystallisation of a dispute) to devise and agree a bespoke arbitral process or alternatively to incorporate existing rules of procedure. In practice, existing rules are often incorporated as the negotiation of bespoke provisions has time and money implications in addition to the potential danger that a tailor-made process may prove to be unworkable in practice.

The main features of ad hoc arbitration are:

(a) Independent proceedings giving parties maximum flexibility;

(b) The Tribunal is chosen by the parties (although if agreement cannot be reached the matter may be referred to an appointing authority); and

(c) There is no review of the award by an arbitral institution.

Institutional Arbitration

Institutional arbitration, as the name suggests, refers to arbitrations conducted in accordance with the rules and procedures of an arbitration institution. Examples of arbitral institutions include:

(a) The ICC based in Paris;

(b) The London Court of International Arbitration, as the name implies is based in London however, the choice of seat, or legal place, is entirely up to the parties;

(c) The Dubai International Arbitration Centre (DIAC) created in 1994; and

(d) The Bahrain Chamber for Dispute Resolution (BCDR) created on 10...