ADR in Focus: Arbitration and Adjudication in Commercial Dispute Resolution
The Alternative Dispute Resolution method you choose will depend on the kind of business dispute you are experiencing. As a startup, being aware of the advantages and disadvantages of different ADR methods and the ways they usually carry out in practice can help ensure that you make the right choice when settling a business dispute.
In this article, we take a deeper look at the main kinds of commercial ADR methods, how they work, and the questions to ask yourself when considering which method to take. This article is Part 2 of a series focused on ADR. For a quick introduction into ADR and an overview into a wider range of ADR methods, see Part 1.
Below, we provide an overview of the arbitration and adjudication processes. There is a range of ADR methods, so it is advisable to seek legal advice from a qualified professional to help you with your specific dispute resolution needs.
Types of Commercial ADR: ARBITRATION & ADJUDICATION
Arbitration
Arbitration is a form of ADR involving an impartial arbitrator - an independent third party appointed to settle a dispute by making a final and binding decision. Very often such individuals tend to be high-ranking members of the legal profession including former Judges. Arbitration is a contract-based form of dispute resolution. Parties must refer their dispute to arbitration if they have an agreement between all the parties that any disputes will be dealt with via arbitration i.e. the arbitration agreement.
What is the arbitration process?
Within a commercial contract, it is common to include an arbitration agreement, determining central features of the arbitration process. Some of these may include how the arbitrators will be appointed, where the arbitration will take place, whether the process will be guided by the rules of an arbitration institution or will be ‘ad hoc’, and more.
The arbitration process begins with a claimant serving the other party with a request for arbitration or a notice to arbitrate document, setting out the dispute and who the claimant wants to appoint as an arbitrator. The other party will have the chance to respond and choose an arbitrator, if appropriate, within a certain time period.
A tribunal of 1-3 arbitrators must be formed. Depending on the number of parties involved in the dispute and the agreed number of arbitrators, the tribunal will either be decided by the parties or will be selected according to the rules of an arbitration institution. The issues to be determined will then be established and a process and timeline will be set, depending on the nature of the dispute and fulfilling the requirements of the parties.
The arbitration will then begin according to the agreed-upon process. The arbitration usually comprises of written submissions and documentation provided by each party, often accompanied by witness statements and technical expert reports.
Generally, a series of arbitration hearings will take place in front of the tribunal, in which the lawyers from either side will put their arguments forward and question each other’s documents and witnesses. After the hearing, the tribunal will come to a decision on the dispute i.e. its award.
Adjudication
Adjudication is a process involving an independent third party, usually an expert in the subject of dispute, who takes the claims of both sides into consideration and makes a decision that is binding (pending any future court or arbitral award) on their dispute.
Adjudication is the required ADR method for disputes which arise in the construction industry and is increasingly being used by other sectors, including the professional negligence sector, when parties have specified the use of adjudication in their contract, or have agreed to use it after a dispute has occurred.
The adjudication process is designed to quickly arrive at a resolution, as it is organised on a strict schedule and may sometimes be wholly based on supporting documents.
What is the adjudication process?
The adjudication process starts when you (the ‘referring party’) serve the other party with a Notice of Adjudication. This document should outline the nature of the dispute, the parties involved, where and when the dispute happened, the resolution you seek, and other details of the case, including the proposed adjudicator and any supporting documentation.
You will then agree with the other party to appoint an adjudicator, or apply for the adjudicator which you have named in the contract. If no one is specified to act as adjudicator, you can refer the dispute to the Adjudicator Nominating Body, who will appoint an adjudicator to your case.
When an adjudicator has been appointed to your case, you will serve the referral notice: a notice outlining the case details and any supporting documents the case will rely on. The referral notice will generally be served within 7 days of the Notice of Adjudication being sent out.
The opposing party is required to serve its response to the referral notice within 7 days, though extensions can be requested. The adjudicator will then make a decision. For construction adjudications, the adjudicator must reach a decision within 28 days of the referral notice’s service.
Useful Links:
A Step-by-Step practical guide on the arbitration process: https://sccinstitute.com/our-services/arbitration/step-by-step-guide-to-arbitration/
Examples of major international arbitration institutions include: the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC)
Adjudication Nominating Body: https://www.ukadjudicators.co.uk/nomination
A list of certified ADR entities can be found on the Chartered Trading Standards Institute website at: https://www.tradingstandards.uk/consumer-help/adr-approved-bodies/
Author: Gaia Freydefont -
Author: Gaia Freydefont -
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DISCLAIMER
This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.
Sources
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Thomson reuters , 'Adjudication: a quick guide' ( Practical Law Construction, -) <https://uk.practicallaw.thomsonreuters.com/8-381-7429?transitionType=Default&contextData=(sc.Default)&firstPage=true> accessed 1 October 2022
Gaby hardwick solicitors , 'Alternative Dispute Resolution – the main options' (Briefing Note, July 2015) <gabyhardwicke.co.uk/briefing-notes/alternative-dispute-resolution-the-main-options/> accessed 1 October 2022
Harper james llp, '-' (Types of alternative dispute resolution methods: choosing the best one for your business, 12 April 2021) <https://harperjames.co.uk/article/choosing-types-of-alternative-dispute-resolution-adr/> accessed 1 October 2022
Stewarts law, '-' (ARBITRATION PROCESS, -) <https://www.stewartslaw.com/expertise/international-arbitration/arbitration-process/> accessed 1 October 2022
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