The advantages of arbitration versus judicial procedure

Arbitration is a private and alternative mechanism of conflict resolution to judicial procedure. Arbitration has notable differences with respect to the courts’ approach. Familiarizing yourself with the different elements of arbitration is key in determining the circumstances in which the parties would be interested in pursuing arbitration or opting for judicial procedure.

Firstly, it is important to understand that arbitration can offer more freedom to all parties in order to adapt several arbitral elements to their situation.

Advantages of arbitration compared to judicial procedure

  • Arbitration must be resolved in law or equity
  • In the case that law is opted for, this allows for the choice of:
    • The law to be used by the arbitrator or arbitrators
    • The number of arbitrators who shall decide the issue
    • The place where the arbitration will be held
    • The language in which the hearings should be held and the language in which the documents should be drafted
    • The type of procedural structure among which the arbitral body makes available to the parties

This wide freedom represents a major incentive for those parties that understand that the rigidness of the judges, as indicated by some earlier points, harms them.

But also other circumstances are given which complement or develop the previous conditions and they are:

  • The potential specialisation of arbitrators in specific issues that give them a different perception of the problem than the purely legal one. This condition is especially advantageous in technically complex disputes regarding non-judicial issues, since the arbitrators of different specialities who are welcome to attend may have that in-depth understanding which the judge or magistrate might lack.
  • The quicker timeline in obtaining a resolution and executing it. This characteristic mainly derives from the following circumstances:
    • The first entailing the adoption of the procedure of the different arbitration courts with a lesser temporary extension.
    • The second being the individual arbitral decision or arbitral award which, in contrast to the court ruling, does not accept a second authority and whose nullification in judicial headquarters is restricted to very limited circumstances.

Disadvantages and limitations of arbitration compared to judicial procedure

Having outlined the main advantages of arbitration, it is also necessary to highlight its disadvantages and limitations.

  • Its cost is substantially greater than that of judicial procedure (mainly due to the arbitral court administration rights and the arbitrator fees)
  • The inability to appeal the award (negative circumstance for the losing party)
  • The inability to submit certain matters to arbitration.

Conclusion

Arbitration, as an alternative to judicial procedure, is a highly recommended alternative to conflict resolution. It offers great flexibility and freedom, and it allows for greater specialisation as provided by the arbitrators, which can be a very valuable feature in procedures with highly technical aspects.

This article is not considered as legal advice

Nicolás Melchior

A Law graduate from the Universidad Carlo III de Madrid, Nicolás Melchior specialises in corporate Law, commercial contracts and electronic commerce. Working languages: Spanish, German, English and French. For any further enquiries please Contact us