Why Arbitrate? Pros and Cons

There are many ways to settle a dispute. Unless relations have broken down completely, the parties will usually attempt to settle the dispute by discussion and negotiations; and this may well lead to a settlement.

 

However, there often comes a point when attempts at negotiation have failed, no agreement is possible, and what is needed is a decision by some outside party, which is both binding and enforceable.

 

The main reasons to chose arbitration are: neutrality and enforcement.

 

Additional reasons: flexibility, confidentiality, additional powers of arbitrators, saving time and costs.

 

There may be situations in which an arbitral tribunal has greater powers than those possessed by a judge. For example, under some systems of law, or some rules of arbitration, an arbitral tribunal may be empowered to award compound interest, rather than simple interest.

 

However, it is often argued that the modern arbitral process has lost its early simplicity. It has become more complex, more legalistic, more institutionalised, more expensive.

 

The matters that are most frequently criticised are: the costs of arbitration; limits on arbitrators' powers; the difficulty of bringing multi-party disputes before the same tribunal or joining third parties; conflicting awards; and what is generally referred to as the ‘judicialisation’ of international arbitration.

Source: Redfern and Hunter on International Arbitration