Free «The Validity of Arbitration Agreement» Essay Sample

Introduction

Disagreements are a constituent part of human life. Numerous factors usually cause situations when people can agree or disagree. In most cases, arguments among people trigger widespread disputes that necessitate subsequent steps to resolve them. These are mainly litigation processes which entail taking legal measures against one’s opponent or through arbitration. Unlike litigation process where intention often comes from the disputants, the choice for arbitration is often motivated by the third party. This would initiate mechanisms of bridging the gap between the warring factions in bid to find a common ground in their conflict. Even so, both approaches aim to achieve a resolution and restoration of peace and harmony regardless of the time and resources involved. This essay critically analyses the assumption that arbitration as a form of dispute resolution unattached to a specific form gives parties more freedom than litigation to decide on the applicable law with respect to validity of the arbitration agreement, the main contract and the law to be applicable during the enforcement stage. First, it assesses the validity of arbitration agreement in comparison to litigation. Thereafter, it describes the merits and demerits of arbitration before finalising with the critical personal analysis of the statement.

The Validity of Arbitration Agreement

Arbitration refers to private judicial proceedings that are designed by an independent third party to resolve a disagreement. It may involve the use of an individual arbitrator or a tribunal. Arbitration serves as an alternative to court action but can still resolve the dispute in a just and binding manner. On the other hand, litigation is the process that is instigated between two divergent factions, whose aim is to enforce or defend legal rights. It is usually done before the jury or judge in the court of law, who makes the final decision based on the manner in which disputants’ arguments present their case but within the provisions of law. 

Whereas litigation processes would usually and unnecessarily be prolonged, the main principle of arbitration is to expeditiously achieve a non-discriminatory resolution of disputes in inquiry by a neutral third party with small expenses imposed on the disputants. Parties are usually at liberty to agree on the method of resolving their dispute without feeling daunted by the law enforcing agencies. The commonest forms of arbitration are domestic versus international, institutional versus ad hoc as well as state versus private forms of arbitration.

More often than not, “people would circumvent litigation because of its exorbitant cost especially when hiring lawyers, it is also time-consuming, emotionally draining and its processes are highly unpredictable because the fate of the case lies directly on the judge or jurists who would often hold the mandate to determine an outcome.” Such undercurrents make litigation ineffective, thus paving way for arbitration as a substitute and the most preferred method of resolving disputes. Unlike the litigation processes, the costs incurred in arbitration are paltry following the limited use of attorneys as compared to court systems where each disputant is obliged to hire competent lawyers, who usually spend substantial amounts of time to assemble evidence in order to find good grounds for defending their clients. In arbitration, evidence allowed by the arbitrator is limited than in litigation processes. Similarly, the liberty to appeal in the case also does not apply to arbitration as it is in litigation where disputants can always make appeals in case they have certain reservations concerning the manner of ruling.

Most significant is the selection of arbitrators in the arbitration processes. A panel of multiple arbitrators is supposed to be selected to take on the role of a judge in litigation. Both disputants are permitted to suggest at least one arbitrator. The two selected arbitrators will then jointly select the third arbitrator. This means that the number of arbitrators in any given arbitration panel has to be odd to eliminate the probability of a tie in passing a verdict through a majority vote. The system has progressively become popular as compared to the use of courts since the decisions in arbitration are often fair and satisfactory for both disputants. Likewise, the disputants are usually allowed some autonomy to determine the validity of an arbitration agreement and even the laws that guide the process; it is the provision that abolishes the possibility of prejudice in the outcome. Conflicting with that, litigation processes bestow all the freedom of determination on the judge or jurist who may sometimes make unfounded rulings, especially when they are externally influenced. This shortcoming often prompts disgruntled parties to appeal for a fair hearing of their cases, possibly by a different organ of the judicial system. In short, the arbitration process is a less inflammatory approach of resolving disputes in which arguing parties attempt to resolve differences between themselves without having to bank on the judicial system which has hitherto proved to be inept, time-consuming and ridiculous.

Distinctive Stages of Arbitration

The customary arbitration first needs a request for arbitration from the claimant. It often contains an inclusive list summarising all claims. The claims are then compiled and forwarded to the respondent in the dispute, who scrutinises them carefully and indicates counterclaims. The claimant is sometimes allowed to reply the counterclaims. After this stage, the process of appointing arbitrators or the tribunal takes place. Here, the two opponents are granted one chance each to identify their preferred arbitrators, both of whom will also get a chance to select the third arbitrator.

After this stage, the exercise will straightaway follow the procedural hearing, in which the official designing of techniques and steps as well as scheduling of the timetable for arbitration are done. This is a critical point when both disputants are brought together in the process of formulating principles that spearhead the smooth and successful arbitration. Subsequently, the claimant will be required to submit the full proclamation of the case since it would be part of the request note. In line with that, the counterclaims and full defence of the respondent will be indicated in the response statement. Lastly, the claimant will be given a chance to reply and make a defence to counterclaim the response of the opponent.

At this stage, the arbitrator begins making remarks to interject the process of arbitration up to the end of the first session. The great care has to be taken to avoid influencing the disputants’ thoughts other than guiding them step by step to confront the dispute between them and forging ahead towards finding a credible and lasting solution. Arbitrators always remain impartial and confidential with the matters of the disputants since they are on oath to do that. Through this provision, disputants are assured of their privacy concerning matters of their conflict; therefore, they will not be nervous to unveil whatever they find necessary to be disclosed as a way of helping the proceedings. Since the proceedings are conducted in concealment and in accordance with the wishes of the disputants, the proceedings will no doubt continue with negligible interruptions from the vicinity.

The nature of the case determines the number and frequency of sessions of arbitration. In the case of a complex dispute, the process may be elongated as compared to a petty one. Furthermore, the discretion of the claimant and the disputant may at times determine the length that any arbitration process may take.

The Merits of Arbitration

Unlike litigation, arbitration is usually highly regarded due to the fact that the process is free from any form of hostility as parties always work together in an amicable and peaceful way. They even craft the structure of resolution jointly as opposed to the situation in litigation process where outright hostility among the disputants is usually prevalent. Since both parties’ contribution would be recognized, vehemence among the disputants is always neutralised as either side will feel well-represented and provided with a fair hearing. Therefore, it is easy to cultivate a reconciliatory mood that may pave way for the immediate healing.

More so, arbitration is relatively cheaper as compared to litigation since the process is not so complicated and resolutions take a short time to be realised. The costs incurred only cater for the services of arbitrators per day and attorneys in case there are any. The expeditious manner in which proceedings are done trims the cost to an insignificant level that eliminates the default of either party. For this reason, the global trend of people who resort to arbitration as a means of dispute resolution is overwhelming.

Besides the fact that arbitration is informal, the processes are very flexible unlike litigation which is confined to the formal system of work days and hours. Depending on the needs and availability of the participants, arbitration proceedings can be conducted any time. The organization enables arbitrators to hasten the process, thus taking the shortest time necessary. In litigation, the process must be scheduled to weekdays, and work hours are restricted. This is why it usually takes ages to fully make a determination in a single case among the backlog of cases. No wonder they say that justice delayed is justice denied.

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Apart from that, the rules of evidence and procedures in arbitration are often abridged. This situation makes it less formal and easily modified to suit the needs of the disputants. In addition, there is an absolute elimination of unnecessary delays and game-playing tactics that, in most cases, are embedded in intricate rules of evidence where witnesses and bulky bundles of documents are required. In arbitration, authentication of facts can easily be executed by means of a phone, which really makes the process stress-free. Because of this provision, lawyers always find it hard to have their services incorporated into arbitration cases as the role may happen to be superfluous. 

Finally, in the arbitration, “the proceedings are always piloted in private and all parties would assent to the agreement to safeguard the confidentiality of the subsequent proceedings as well as terms of the final resolution.” This is vital because the nature of certain information pertinent to either party in a dispute might result in boundless humiliation if it leaks to the public. It is due to this provision that arbitration is highly valued over litigation because it preserves the dignity of both disputants on their way out of the argument.

Demerits of Arbitration

Conversely, arbitration has its downsides which often discourage people, forcing them to opt for other means of conflict resolution. Since the final resolution is binding, the process limits the chances of the discontented party to seek redress following the arbitrators’ award, which may be perceived to be unfair by either side.

Likewise, arbitration may also fail to offer an equal ground for both disputants, especially when the dispute is between the parties with unequal strengths and drawn from differing socio-economic classes, for instance, the proprietor of a company versus a servant. It is usually in such kinds of situations that the outright corruption percolates into the scene only to influence the outcome in favour of the superior party. Similarly, because of the informality and flexibility of the proceedings, sturdier parties in this case will always navigate ways of tipping the arbitrators to obtain their favour. Sometimes, parties may be pressured to append signatures before commencing the deliberations in the deal, which may work in favour of the robust factions in the dispute.

Correspondingly, the impartiality in the process of choosing arbitrators is actually debatable, particularly when the maker of the decision is selected from a pool list such that those who happen to be favourites are the ones assigned with cases to deal with. Many people have expressed reservations concerning some of the arbitrators who have been partial during the arbitration process. The trait usually hinders a just outcome of the process, causing an untold disappointment among the participants who expected justice to be exhibited. Additionally, the fact that arbitrators are freely chosen by a party within the industry makes the process less objective as there is a likelihood that some of them favour the side that have appointed them.

Moreover, the lack of transparency is also a key alarm for the parties involved in arbitration. Sometimes, arbitration is perceived to be highly disposed to manipulation of arbitrators by the parties in dispute due to the lack of a formal structure through which resolutions should be made. Besides, the fact that lawyers are very often unwelcome in the system may create a leeway for violation of conventional laws and procedures for dispute resolution, especially if the warring sides are non-cognisant of their rights as expressed by the law. Equally probable is the prevalence of prejudice given that the hearing of the dispute is done in private. This, in turn, complicates the matter for those who may be dissatisfied with the outcome as the decisions generated through arbitration are hardly ever reviewed by court.

Finally, because of the augmented preference of this approach, the costs are inflating day by day, and it is predicted that as time goes, the cost of arbitration will be higher as compared to that charged for launching a lawsuit. This will hinder the process of getting justice because many of those who would wish to adopt arbitration due to the weight of its merits may eventually be scared by the rate at which the costs have inflated.

Critical Analysis of the Statement

Focusing on the aforementioned illustrations of arbitration and litigation processes, the question statement purporting that arbitration as a form of dispute resolution unattached to a specific form gives parties more freedom than litigation to decide on the applicable law with respect to validity of the arbitration agreement, the main contract and the law to be applicable during the enforcement stage is explicitly plausible. Looking at arbitration chronicles, “disputants always enjoy the liberty to participate in formulation of laws on which the direction towards the resolution of the conflict is determined.” Since the system is informal, disputants get ample room to let loose their rage through talking. Positive ventilation on the issue is a precondition that fosters inner healing in any aggrieved person. However, this is alien for the court system where personal feelings and emotions are never given consideration.

Besides, through a platform that disputants are given in charting their way out of the argument, they are usually able to express themselves in the manner that would be clear for the arbitrators as well as the counterpart. In the process, probable misconceptions and misjudgements are eliminated, making the hearing free from biasness. Normally, the process of arbitration is flexible in its schedules; therefore, ample time can be allocated for due deliberations. This is what the court system often lacks because of its formal schedules and limited time to each case’s proceedings. For this reason, the plaintiff and the defendants hardly ever get ample time to express themselves meticulously concerning their issues in a manner that can satisfy all participants of the case.

In addition, unlike the litigation process, arbitration guarantees an indiscriminately friendly environment in which both disputants find fairness for it is free from any form of coercion. Normally, many people prefer arbitration to litigation because court proceedings are intimidating in nature and so they tend to scare potential clients. They are bereft of their freedom to argue; that is why they are compelled to hire services of lawyers who have the audacity to do it on their behalf. Arbitrators, on the other hand, put disputants in a relaxed mood so that they can speak and challenge any issue that they deem is worth attention. This freedom makes the process of resolution easier and manageable as all reservations are divulged for deliberations. Disputants may also see the possible mechanisms of arguing in a competent way without fear of being misunderstood.

The procedures of litigation are more embedded in formal law and are best suited for criminal but not civil cases. In such a situation, they require lawyers who may interpret laws competently in order to win the case within the time stipulated. Commoners often find this very hard given the complex nature of laws of any country. Arbitration has an upper hand for determining of civil cases, and here as well, disputants are actively involved in drafting laws to guide the process. The approach lacks a predefined system of laws on which all proceedings are to be conducted. Laws are drafted before the commencement of proceedings with regard to the needs and conditions of the participants. If disputants are granted freedom to this extent, they become cautious as to drafting of rules that may not deter their final expectations, thus increasing the probability for them to be sincere.

Conclusion

Due to the hitches associated with the litigation process and insufficient knowledge that people have about the dynamics of law, a number of people prefer having their disputes resolved through arbitration than in court. Numerous civil cases get sorted through this system of resolution owing to the fact that the envisaged outcome always favours the participants, thus contributing to the lasting peace and reconciliation between them. However, litigation is suitable for making decisions on criminal cases where determination is based on predefined laws without any mutual benefits seen in the outcome of such cases other than the criminal cases that usually call for prosecution and imprisonment of those found culpable of crimes. Many loopholes are linked to the procedures of litigation which usually do not serve to provide long-term solutions for parties involved but simply function as a way through which participants can secure their ends in life. For example, the cost of hiring a lawyer is exorbitant due to the increasing level of unemployment and a subsequent rise in crime rates. Therefore, lawyers want to benefit prominently from the situation. Eventually, the outcome lacks credibility because cases take unnecessarily longer time than expected; and a colossal amount of money is lost in the process, leaving the disputants totally devastated.