Arbitration: A Flexible Alternative to Court for Resolving Commercial Disputes

When a commercial dispute arises, many businesses assume that court proceedings are the inevitable next step. Litigation, however, is just one available option.

For many contractual and business disputes, arbitration offers a private, flexible and legally binding alternative that allows parties greater control over both the process and the tribunal deciding the outcome. 

What is arbitration?

Arbitration requires a written agreement (“arbitration agreement”) to arbitrate by way of appointing an arbitrator (a person) to form an impartial tribunal and for the parties to the arbitration to be bound by the arbitrator’s decision. Arbitration can be called an “alternative dispute resolution” (or “ADR”) procedure, i.e. an alternative to court litigation. Other ADR procedures include expert determination, judicial adjudication and mediation.

Generally, for many types of commercial disputes arising from written agreements, including M&A (sale of business), shareholder, partnership and other complex business disputes, and in terms of remedies sought, arbitration is the same as court litigation. Both lead to legally binding and court-enforceable awards dealing with issues of liability, financial damages, interest, and the parties’ costs (including the arbitrator’s costs and that of the appointing body if any).

Litigation, however, involves following the formal court procedure, which can be protracted and involves hearings conducted in public.

In contrast, the parties in an arbitration have control of the process, including the choice of the arbitrator (judge) who will manage the process from appointment through to the conclusion of the arbitration.

Furthermore, unlike litigation, arbitration is procedurally flexible and therefore potentially quicker and cheaper than litigation, with the whole process conducted in private.

Also subject to the provisions of applicable arbitration law, the tribunal has discretionary inquisitory/investigatory powers for the ascertainment of facts and law. 

Starting an arbitration

The requirements for starting an arbitration should be set out in the arbitration agreement, or the incorporated institutional arbitration procedural rules (for example the CIArb Arbitration Rules) if any. Default provisions are included in the Arbitration Act. 

Appointing an arbitrator of choice

In appropriate circumstances the parties may be advised to choose as their arbitrator someone who is not a lawyer but is a skilled and experienced arbitrator with expertise in the subject issues of the dispute.   

It is not a natural pre-requisite that an arbitrator must be a lawyer. A professional legal qualification to practice as a lawyer is not a professional qualification to practice as an arbitrator. In addition, certain types of disputes may be more suited to arbitrators with specific skill sets, and examples can be found in the practice areas of maritime, commodities and property arbitrations. 

The requirements for the appointment of the arbitrator should be set out in the arbitration agreement, or the applicable rules if any. Default requirements are included in the Arbitration Act.

If the parties are unable to agree on the appointee, they may agree to instruct an appointing body or a professional institution to make the appointment on their behalf from arbitrator panels maintained. The parties may be able to set the selection criteria. An appointment fee will usually apply.

Conduct of the arbitration

The applicable arbitration law provides for the conduct of the arbitration, and this may be supplemented by the arbitration rules (“applicable rules”) of an arbitral institution that the parties may agree to adopt.

What’s involved?

Subject to the applicable arbitration law and rules, the parties have the autonomy to provide the arbitrator with executive powers for the procedural conduct of the arbitration.   

Unlike court litigation, in consultation with the arbitrator, the parties can design the process to suit their needs and that of the dispute. Procedural features may include:  

• A preliminary procedural meeting between the arbitrator and the parties in person or by conference phone call/video call to discuss the dispute, the parties’ requirements, and to aid the arbitrator in the design of procedural directions.  
• Directions that allow the parties to make their cases and address those of their opponents, including providing for disclosure of documents and submissions of arguments and supporting evidence, including expert evidence.   
• Procedural provisions for interim awards on particular issues.  
• The processing of applications from the parties for variations to the tribunal’s directions.
• A hearing may or may not be required. If a hearing is required, its time and location would be as agreed between the parties and the arbitrator.      

The award

Like at court, subject to the parties agreeing otherwise, in making their determination resolving the dispute and the issues involved, the arbitration tribunal may be expected to evaluate and weigh the arguments and evidence of the parties taking account of factors including relevance, admissibility, who has the burden of proof, the balance of probabilities, and the applicable law including considerations of justice.  The tribunal’s decision would be set out in a document which is ordinarily referred to as an “award” and would ordinarily be accompanied by reasons.  A final award would include the allocation of the parties’ costs of the arbitration (their own legal costs, the arbitrator’s costs, and any appointing institution’s costs). Unless agreed, the determination of the recoverable costs will be a consideration.  

Appeal

Awards can be challenged in the High Court on limited grounds, particularly substantive jurisdiction, and serious irregularity and appealed on a point of law. 

Enforcement

The Arbitration Act (Section 66(1), Arbitration Act 1996) provides for the enforcement of awards. Subject to the terms expressed therein: “An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.”

Settlement

During the arbitration, the parties are free to engage in or to continue settlement negotiations between themselves, and the tribunal would encourage this. If the parties settle their dispute (including interest, if relevant, on sums payable and costs), they may request that the arbitrator produce what is referred to as a “consent award,” giving court enforceability to the settlement terms reached. 

This explanatory overview is directed at businesses and/or individuals contractually drawn into required arbitration proceedings for commercial disputes, but who are unfamiliar with the arbitration procedure. The overview is also helpful for those who wish to consider arbitration as a mechanism for resolving potential or actual disputes.   

Please be aware that given the legal nature of the subject of this article, Parties are advised to take professional legal advice on the suitability of any dispute resolution process for their needs and that of their dispute and in the conduct of any such process. Please note that given the neutral nature of ADR dispute resolution roles, communications in this regard will be on a disclosable basis.  

This article is intended to represent general oversight only in this regard. It is non-exhaustive, is not a recommendation of any procedure, is not legal advice and should not be relied on as such. The scope of the article does not include but may contribute to an understanding of statutory arbitration. For present purposes, our comments are based on and made in relation to disputes which are subject to the Arbitration Act 1996 as amended by the Arbitration Act 2025 (together referred to as the “Arbitration Act”).