Arbitration in NSW

Arbitration in NSW

Arbitration is a form of private dispute resolution and a popular alternative to court proceedings. It is an impartial, efficient and enforceable method to resolve commercial disputes.

Find out more about Arbitration in NSW, the methods used, advantages and processes involved.

Let’s take a closer look.

What Is Arbitration?

Arbitration enables parties to engage in alternative dispute resolution by utilising a private organisation or administrating authority to manage the process. Unlike litigation through a court system, the arbitration process allows parties to settle the dispute confidentially without the additional expense of lengthy court proceedings. The decision is generally legally binding and enforceable in the courts.

When both parties agree to settle a dispute via arbitration using an independent third party, depending on the type of process, the arbitration may also include an agreement to waive their right to a trial. 

Arbitrators who determine the outcome of a dispute are called the arbitral tribunal, they must act fairly and provide each party with an opportunity to state their case and adapt procedures as the circumstances require.

 

Types Of Arbitration?

Several different types of arbitration can be varied to suit the needs of those involved.

High Low Arbitration

High-low or bracketed arbitration is when parties have agreed to parameters for the award. This means the defendant will pay the agreed low figure, or the plaintiff will accept the high figure.

Binding Arbitration

This form of arbitration is legally binding, enforceable and similar to a court order.

Mandatory Arbitration

Court-ordered, mandatory or judicial arbitration is a court-administered scheme mandated by legislation and used for pending court cases. A court will order this type of arbitration in the early stages of a lawsuit case to attempt to de-escalate the issue through the non-binding advisory arbitration process.

Non Binding Arbitration

A non-binding arbitration is when the arbitrator issues a non-binding award after the hearing, where both parties may consider it an advisory option. If approved, the case will be settled before going to trial. If declined, they may still go to court to decide the matter.

Online Arbitration

Online arbitration occurs exclusively online, utilising email, video conferencing and web-based communications. It is consensual arbitration where both parties agree to settle the dispute in a previously agreed format.

Online processes may be challenging as they may not always offer a regulatory framework and lack due process.

Pendulum Arbitration

Pendulum arbitration is common in industrial disputes between a trade union and management and international tax disputes. The arbitrator must choose the more reasonable option.

In the United States, it is known as Baseball arbitration, where both parties select a single figure, and the arbitrator must choose one as the award. With this type of arbitration, there are only two possible outcomes, and the decision is binding.

Night baseball arbitration is similar to the above, except the figures are not revealed to the tribunal. 

 

International Commercial Arbitration

When countries need to settle commercial disputes, they may use an international commercial arbitration process, which involves one or more arbitrators and can eliminate the need for court proceedings or class action claims. The arbitrators are a dedicated group of judges with specific expertise in international commercial arbitration matters. International conventions exist to help settle investment disputes between citizens and businesses of other countries.

In Australia, the International Arbitration Act governs international commercial arbitration by outlining the mandatory procedures required when conducting procedures in Australia.

Australia must also comply with obligations contained in various international conventions, such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Arbitration is beneficial for international commercial disputes because it allows transaction management by impartial, neutral third-party arbitrators in a neutral legal system and jurisdiction agreed upon by both parties. 

 

How Does Arbitration Work?

In most cases, the arbitration process is driven by a pre-dispute contract, where both parties agree that their disputes will not progress to the court system.

The arbitration process is governed by the relevant state arbitration law and the Federal Arbitration Act, there may also be an administering authority that will govern the process.

An arbitrator will hear testimonies, examine evidence and offer an option and suggestion for damages or an award, which is a figure that is used to settle the matter. They will provide reasons for their decision and display procedural fairness.

 

What Is The Cost?

Arbitration is a cost-effective method of dispute resolution because disputes can be resolved quickly, unlike the court system. Expensive court and legal costs, lengthy delays with caseloads and processing schedules can be avoided.

An arbitral tribunal can award costs relative to the nature of the dispute, and in some cases, the losing party may bear a portion of the administration fees.

 

How Do You Select An Arbitrator?

Both parties involved in the dispute agree on an arbitrator, which may include using a third party for negotiations. In some cases, selecting a person with an appropriate degree of expertise in the matter of dispute can be beneficial.

In Australia, industry bodies maintain a list of suitably experienced and qualified individuals who can settle a dispute, such as the Australian Institute of Family Law Arbitrators and Mediators.

 

What Is The Difference Between Mediation And Arbitration?

In a mediation conference, the mediator’s role is to guide both parties to reach an agreeable resolution without making any decisions for them. An arbitral tribunal is a more formal process. The arbitrator takes on the role of a judge and is responsible for making the final legally binding decision.

Once an arbitration process has commenced, parties can not withdraw, and they often waive their rights to a trial by a jury. The decision is legally binding and non-appealable.

 

What Are The Advantages Of Arbitration?

Choosing arbitration to resolve disputes has several advantages, as it is a more popular alternative than going to court. 

Resolving disputes via arbitration has several other benefits including the following:

 

  • Participants can choose their arbitrator, which can be especially useful for highly technical subject matter disputes
  • Content can also be adapted to suit the needs of both parties, and each arbitration process can be personalised to suit the circumstances
  • Resolution of dispute is faster than a court proceeding
  • Proceedings are private and can be confidential, and disclosures made can be protected
  • The environment can be adapted to suit the parties, ie, the language can be changed, which may be different to the official language of the country where they are located
  • It is easier to enforce internationally than court verdicts
  • Limited options to appeal an arbitral award can save time by resolving the issue faster
  • The format may be in person, via video conferencing or through written submission, parties can choose the format that suits them best

 

What Are The Disadvantages Of Arbitration?

The arbitration process has several disadvantages, including the following:

 

  • Arbitration agreements may be present in other ancillary agreements, which can mislead potential employees or customers
  • Some binding arbitration agreements waive a person’s ability to access the court or jury to decide the case
  • Confidentiality and disclosure lines can become blurred
  • Ongoing arbitration business arrangements may influence an outcome
  • Limited ability to appeal an unfair decision
  • Depending on the location, the ability to enforce the award, instead of a court ruling may be limited
  • Discovery, providing the other party with all relevant documents, may be non-existent or extremely limited in an arbitration setting
  • An arbitration award is not always enforceable

 

Summary

There are several different types of arbitration, and each can be varied to suit the needs of those involved.

Choosing arbitration to resolve disputes has many advantages, and it is a popular alternative to going to court. Participants can choose their arbitrator, which can be especially useful for highly technical subject matter disputes, and proceedings are private and confidential.

When countries need to settle commercial disputes, they may use an international commercial arbitration process, which involves one or more arbitrators and can eliminate the need for court proceedings.

Arbitration is effective for international commercial disputes because it allows transaction management by impartial, neutral third-party arbitrators in a neutral legal system and jurisdiction agreed upon by both parties. 

When both parties agree to settle a dispute via arbitration using an independent third party, depending on the type of process, the arbitration may also include an agreement to waive their right to a trial. 

 

FAQs

 

What Is The Purpose Of Arbitration?

The arbitration process allows parties to settle the dispute confidentially without the additional expense of lengthy court proceedings. The arbitration process can be personalised to suit the circumstances. Resolution of dispute is faster than a court proceeding and is a more cost-effective option than court proceedings.

 

What Is The Difference Between Mediation And Arbitration?

In a mediation conference, the mediator’s role is to guide both parties to reach an agreeable resolution, without making any decisions for them. Arbitral tribunals are a more formal process, where the arbitrator takes on the role of a judge and is responsible for making the final legally binding decision.

Once an arbitration process has commenced, parties can not withdraw, and they often waive their rights to a trial by a jury. The decision is legally binding and non-appealable.

 

What Are The Disadvantages Of Arbitration In Australia?

There are several disadvantages of arbitration in Australia, including the following:

  • Arbitration agreements may be present in other ancillary agreements, misleading potential employees or customers
  • Some binding arbitration agreements waive a person’s ability to access the court or jury to decide the case
  • Confidentiality and disclosure lines can become blurred
  • Ongoing arbitration business arrangements may influence an outcome
  • Limited ability to appeal an unfair decision
  • Depending on the location, the ability to enforce the award instead of a court ruling may be limited
  • Discovery, providing the other party with all relevant documents, may be non-existent or extremely limited in an arbitration setting
  • An arbitration award is not enforceable

Simon Fletcher is the Principal Solicitor at FletchLaw. He has been admitted as a solicitor to the High Court of Australia and the Supreme Court of New South Wales. His academic qualifications include of a Bachelor of Laws, a Graduate Certificate in Professional Legal Practice and a Master of Applied Laws (Mediation and Family Law Dispute Resolution). He can offer assistance in a wide variety of legal areas.

Simon is a registered provider of Dispute Resolution Services with the Attorney-General’s Department

If you need further advice regarding Arbitration or any other legal matter call 02 9159 9026 for a free 30-minute initial consultation.

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