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Arbitration – Taking control of your commercial dispute

Commercial disputes have always been an unavoidable element of doing business as parties to a mercantile contract or transaction would often find themselves in disagreement at some point during their dealings.

Commercial disputes have always been an unavoidable element of doing business as parties to a mercantile contract or transaction would often find themselves in disagreement at some point during their dealings. Such disputes need to be resolved transparently and effectively, ensuring the legitimate rights and interests of the concerned parties are in compliance with the law. Traditionally, those commercial matters would be heard before a court of justice whereby a state-appointed judge would rule in favour of either the claimant or the respondent in a case.

However, traditional litigation carries its load of drawbacks when it comes to commercial disputes. Firstly, it is a public affair – names of the parties and the nature of their dispute are displayed at the court and in gazettes and the courtrooms are open to any member of the public (or eyeing competitors) to attend. This would cause irreversible reputational damage and many businesses have failed to fully recover from a litigation matter. Moreso, traditional litigations are more often than not decided over a point of law rather than on commercial reasoning with judges who might not be familiar with the particular field of commerce at stake, despite usually being vastly experienced and skilled at interpreting laws. This might sometimes leave the claimant party feeling aggrieved at a court decision held in favour of the respondent party on a singular point of law or due to the sheer skill or seniority of the respondent party’s attorney whereas the claimant might believe that a commercially savvy instance would have ruled in its favour.

Thus, the call for “private justice” is loud and clear in the commercial space, and arbitration as an alternative dispute resolution avenue offers just that. Arbitration is the out-of-court resolution of a disagreement between two commercial parties decided by an impartial third party, the arbitrator. The arbitrator is jointly appointed by the parties to a dispute and in case the parties cannot reach an agreement over the choice of one arbitrator, they would each choose one and the two thus appointed arbitrators would, in turn, appoint a third impartial arbitrator. Unlike the courts’ state-appointed judges, the arbitrator or arbitrators are chosen mainly for their knowledge of the particular area of business in dispute. For example, in a commercial dispute involving companies in the energy sector, a seasoned and respected professional within the energy field may be chosen as the impartial arbitrator to consider the facts and deliver and award. The parties also have full control over the appointment of their own representatives or advisors who would assist the arbitrator or arbitrators in ensuring that the proceedings are duly carried out in compliance with the chosen rules of arbitration.

Moreso, one of the most salient propositions of arbitration is its privacy. Indeed, arbitration proceedings are private and would not be known to the public domain. There are no public court records to be filed and no third parties, including the press or competitors, are allowed in the hearing. This serves to preserve the reputation of the parties and allays one of the main concerns of businesses around the globe – to see their dirty laundry aired in public. Even the arbitral award would not be published, except with the express mutual consent of the parties and that too in a redacted form, i.e without the names of the parties appearing.

Arbitration proceedings are also usually quicker than traditional litigation. An arbitral tribunal is constituted as a one-off event specifically for the dispute at hand, as opposed to traditional courts that are known to face colossal workloads and an extensive backlog of cases. As the arbitral tribunal is tailor-made to the parties’ unique dispute, they have the control over when and where the proceedings are to take place instead of being restrained by the timeline imposed by a traditional court. As in business time is money, there is no underestimating the financial savings associated with the swift delivery of an award.

The parties can also choose the seat of arbitration at their own convenience. This is particularly advantageous in case of cross-border disputes where the claimant might find it arduous to start a litigation procedure in the respondent’s country. By choosing a neutral country, such as the Republic of Mauritius, as the seat of arbitration, the claimant would ensure that the proceedings are carried out on a level playing field without the respondent having an edge created by its knowledge of its own domestic legal system. Incidentally, the Mauritius legal system is well established and has its composite roots in the French Napoleon Code (civil law) and the British legal framework (common law), positioning the country as an excellent bilingual seat of arbitration.

Arbitral awards are also generally easier to enforce in other nations than court judgments by virtue of the provisions of the New York Convention 1958, which currently boasts 172 contracting states. The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitral awards made in other contracting states without having to reinterpret such awards nor start fresh litigation procedures.

Therefore, arbitration and alternative dispute resolution methods provide a more flexible option and a swifter way to resolve commercial disputes. Parties to such disputes are allowed to control and set the bases of tailor-made proceedings with a view to a better quality of justice.

Author: Ashiv Parianen, ACIArb

Senior Legal Advisor at Centurion Law Group