Arbitration - Concept

Arbitration is a legal process which takes place outside of the courts, but still results in a final and legally binding decision similar to a court judgment. Parties involved in arbitration are effectively opting out of the court system and submitting their case for resolution by a neutral, third party arbitrator. The reasons for selecting arbitration vary from case to case. Arbitration is generally faster, less expensive and more informal than going to court. It also has the advantage of being private and confidential.

Within the limits permitted by law, parties are free to negotiate the ground rules under which they want the arbitration to take place, such as the number of arbitrators or whether formal rules of evidence will apply. Binding arbitration clauses can be written into most kinds of contracts, requiring that in the event a dispute arises in conjunction with the contract, the parties will go to binding arbitration instead of to court. The cost of arbitration is generally shared by the parties.

The decision of an arbitrator is as binding on the parties to the arbitration as a court judgment, and it can be enforced by the courts, if necessary.

Arbitration in Pakistan

Pakistan is the signatory of United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards concluded in New York in June 1958 (also known as the New York Convention 1958) and of International Convention on the Settlement of Investment Disputes between States and Nationals of other States. In order to implement and incorporate these conventions within the law of land, two Acts have been passed by Parliament i.e.:

• Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011;
• Arbitration (International Investment Disputes) Act, 2011

Under the force of these Acts, the Courts of Pakistan get the jurisdiction to recognize and enforce the Awards rendered pursuant to these Conventions as binding and to execute the same within its territories in the same manner as the judgment passed by the Courts in Pakistan.

What is Arbitration?

Arbitration is a method of dispute resolution in which a neutral third party, an arbitrator, conducts an evidentiary hearing and/or reviews written submissions from the parties. Upon consideration of the evidence, the arbitrator makes a legally binding decision which can be enforced in the same manner as a civil court judgment.

Arbitration differs from mediation in that once you enter the arbitration process, you are bound by the arbitrator's decision. Mediation is a negotiation process, in which the mediator helps the parties negotiate a mutually acceptable solution.

How does Arbitration Work?

Arbitration provides distinct advantages over the court system in many different types of disputes. Because arbitration is a private method of settling disputes, parties can tailor the arbitration proceeding in almost any manner they choose. For example, parties involved in arbitration can agree to limit the number of witnesses each side will present, set parameters on the amount and type of evidence that will be presented, and pre-determine what issues the arbitrator's award should cover.

Another important benefit of arbitration is its ability to provide the parties with an arbitrator experienced in the subject matter of the dispute. Many cases involve complex evidence, testimony, and documents. The arbitrator's knowledge allows for a quick understanding of the issues, which in turn saves time and expense.

Because they are conducted by private agreement, arbitration hearings are not open to the public and the decisions reached are generally not matters of public record.

What is High-Low Arbitration?

In High-Low arbitration, the parties mutually establish, prior to the hearing, a range in which the award must be. lf the arbitrator's decision is between the high and the low figures, that amount is the final award. However, if the award is above the pre-set maximum, it automatically moves down to the previously agreed-upon high figure. Conversely, if the arbitrator's decision is below the established minimum, the award moves up to the predetermined low figure. In most instances, the parties agree to not inform the arbitrator of the range of their High-Low agreement.

Is Arbitration Final?

Arbitration awards are final and binding on all parties to the arbitration, and may not be appealed except under very limited circumstances provided by statute. Awards may be confirmed in any court having jurisdiction and, thereafter, carry the same force and effect as an original court decision. Rules of Arbitration include an Internal Appeal Procedure, but it does not apply unless the parties specifically so state in their Contract to Arbitrate.

Ultimate Role of Arbitration

There has been a significant improvement as to the adaptation of arbitration as a technique for the resolution of international trade disputes in accordance with the escalation in international trade over the last several decades. Parties in dispute must agree on the usage of arbitration as a mode of settlement of their trade / commercial disputes. Arbitration, however, contains many gains over litigation, the usual method for the resolution of trade disputes. Many of the key advantages of arbitration are as under:

• The processes are flexible;
• There is no issues as to jurisdiction;
• Arbitrators are neutral;
• On the basis of procedural corporate expertise, arbitrators can be appointed;
• International treaties may enforce the arbitration awards;
• Since the arbitration proceedings will not be conveyed, the parties should be able to avoid the adversative publicity which usually follows litigation, so they may keep it confidential;
• Where a court judgment is commonly subject to rights of appeal to higher appeal courts, an arbitration award is normally final.

Institutions around the world have recognised the upsurge in the popularity of international arbitration. An increase in the number of arbitration centres for meeting the requirements is the possible outcome. Legislature have streamlined the arbitration laws and procedures and responded by establishing improved national courts, generally establish a readiness to deliver a sociable environment for arbitration and to necessitate the parties to observe with predetermined obligations for resolving disputes through arbitration. Local courts normally construe arbitration clauses extensively so that they shield a large number of disputes and will normally make it more problematic for parties to challenge arbitration awards in the courts.

Arbitration may be formal where disputing parties may move to an established foundation which is specialised in arbitration proceedings or ad hoc. Where disputing parties may establish their own rules and jurisdiction for the arbitration process.

International Legal Partners give support and assistance to the clients to get their dispute settled domestically and worldwide through Arbitration Centers and also helps the clients to get the Awards rendered by these Arbitral Forums recognized and enforced in Pakistan.