What are the advantages and disadvantages of arbitration?

Introduction 

The advantages and disadvantages of arbitration are present in this article. Arbitration has played a significant role in India’s history. Previously as well, parties in a dispute would present their cases to a panel of wise men, therefore creating a system known as the Panchayat system.

Various independent regulations in the international domain have come to a head with the establishment of the Permanent Court of Arbitration. The international community’s dedication to a peaceful resolution of problems was obvious with its establishment. 

Arbitration can take several forms, including ad hoc and institutional arbitration, as well as domestic and international arbitration.

The popularity of ad hoc and institutional arbitration has sparked a discussion about which is more effective. According to PriceWaterhouseCoopers’ (PWC) study “Corporate Attitudes and Practices towards Arbitration in India,” the “majority of the enterprises in India that experienced arbitration favored ad-hoc (47 percent) over institutional arbitration” (40 percent ).

After the UNCITRAL model Laws on International Commercial Arbitration is developing and the popularity of arbitration grew even further. The UNCITRAL model laws sparked the creation of a slew of municipal legislation based on them.

Arbitration’s popularity is wide by nearly the world society.

In the first place as the advantages of arbitration over adjudication or other kinds of conflict settlement, on the other hand, have fueled its popularity therefore, the purpose of this essay is to explain the benefits and drawbacks of arbitration.

Advantages 

1. Objectivity

From the beginning, the arbitration procedure has been marked by a sense of justice. The parties have a say in the appointment of arbitrators, the parties are heard individually in an arbitration procedure, and, perhaps most crucially, the arbitration process is based on the parties’ decision to settle their problems amicably.

2. It saves time.

Not only does the arbitration procedure save time for the parties as well as saves time for the court. The courts take a long time to handle the majority of civil matters. The purpose of the emergence of alternative dispute resolution techniques was to shorten the adjudication process.

Furthermore, as there is a responsibility to settle commercial conflicts as quickly as possible.

3. Affordability

In comparison to adjudication, the costs of arbitration are small. One of the reasons that the parties favor arbitration as a means of resolving their disputes is that it is cost-effective.

4. Reliability

Another aspect contributing to the process’s popularity is the attention placed on the confidentiality of the information involved. The new modification to India’s Arbitration and Conciliation Act in 2019 makes the arbitration parties obligated to maintain the highest level of confidentiality throughout the procedure.

5. Maintaining control

Since the parties in a dispute are in a position of control from the start. Similarly, they have more control over the arbitration process than they do over any other dispute resolution process. By agreeing to the agreement, the parties are directly participating in the decision-making process.

6. Informal Process

The arbiter is chosen based on the parties’ preferences in the arbitration process. Firstly, the technique takes place in an informal setting that is conducive to dialogue. Secondly, unlike the courtroom where a level of formality has to be maintained, therefore, arbitration allows the friendly exchange of words without many mannerisms to be followed.

7. Hostility prevention

Unlike the courtroom, where there is free debate and charges thrown around, therefore arbitration encourages civil discourse.

8. Based on an agreement, an award is given.

Arbitration is frequently the consequence of a perfect agreement between the parties so no win-win situation may exist until the parties are at odds.

9. Procedures that are less complicated

The outcome of a legal conflict is more adaptive to the two parties involved. It is not necessary for any side to hire an attorney to represent them.

Disadvantages

1. There are no appeals: The arbitration award only allows for a limited number of appeals. One of the most obvious disadvantages of arbitration is the limited scope of appeal available in awards. There would be no avenue for appeal or rectification if there was a fault with the award.
2. There are many different arbitration guidelines to pick from, and it can be difficult to decide which ones to use. Similarly, there are a plethora of institutions that provide arbitration services which hence makes it difficult to choose between them.
3. Different statutes exist in certain nations for local and international arbitration. As a result, determining the applicability of international arbitration laws is challenging.
4. The cross-cultural language barrier is one of the most significant challenges that arise during arbitration. The language and culture of the two regions are always in conflict. It becomes increasingly difficult to close the gap and reach a consensus.