Arbitration: Still A Valued Means Of Resolving Disputes?

It is appropriate that the (re)insurance market regularly returns to the debate over the available options for the resolution of disputes that inevitably arise. The choice of dispute resolution method is something which needs to be addressed and built into the contract when the prospect of dispute is furthest from the parties' minds, namely when a new and hopefully mutually beneficial business relationship is being forged.

Advantages Of Arbitration

Privacy

A fundamental difference between court-based litigation and arbitration is that the former takes place in public and therefore under the scrutiny of the press, the public at large and, more importantly for the parties, their customers, prospective customers and competitors. Imagine the situation: it is the morning of a key pitch for a new account, everything has been prepared to give the view of your company as an ideal business partner. You pick up the trade press and it is full of the lurid details of an acrimonious dispute with a former client which has just come to trial.

Had the dispute been resolved by arbitration, the details would have been kept private and confidential, the rather embarrassing explanation of the court case would not need to have been given at the pitch and the customer would not have gone elsewhere.

Legal Precedent

Another important point is that parties might not want the result of their dispute to create a legal precedent to which they (or others) are bound in the future. One arbitration award is not binding on another tribunal, and so having disputes concerning the same point determined in arbitration enables you to live to fight another day.

Flexibility

Arbitration is consensual, the rules and procedure (for example, in relation to disclosure) can be tailored to the particular needs of the dispute, either by agreement between the parties or determination by the arbitrators. Court procedure is "one size fits all" and, except to a limited extent, cannot be tailored to the particular requirements of a dispute or its parties.

Enforceability

This is widely regarded as the key advantage of arbitration over court litigation. There is an international mechanism for the straightforward enforcement of arbitration awards - the New York Convention - which has been ratified by 143 countries. Because of the number of signatories to the New York Convention, an arbitration award is more readily enforceable in many more countries than, say, an English...