HomeOpinion & AnalysisArbitration insights: Why your company needs arbitration

Arbitration insights: Why your company needs arbitration

BY JACOB MUTEVEDZI

The rapid growth in cross-border trade means that commercial disputes are likely to span across multiple jurisdictions. For instance, intellectual property rights can simultaneously exist as separate pieces of property under distinct national laws in several jurisdictions, despite the operation of international treaties which harmonize the registration of intellectual property rights, such as copyright, trademarks and patents across signatory countries. Consequently, in the event of litigation of intellectual property disputes involving various jurisdictions, litigants might be forced to institute separate proceedings in those jurisdictions to enforce intellectual property rights existing under each of them. Resultantly, such proceedings may be potentially riddled by complex conflict of laws considerations. By comparison, arbitration accommodates multiple issues and rights arising under different jurisdictions to be resolved under a single process.

Parties embroiled in cross-border commercial disputes place a premium on jurisdictional neutrality. None of the parties is agreeable to having the dispute determined in their adversary’s country. Arbitration affords parties that jurisdictional neutrality over national courts. Parties are free to elect a neutral forum for arbitral proceedings. They can choose a neutral arbitrator who does not come from the same jurisdiction as the parties. They can also agree to apply neutral law to govern the dispute. Jurisdictional neutrality gives arbitration a clear advantage over litigation in international commercial disputes.

Specialised expertise

The subject matter of international commercial disputes cuts across an assortment of sectors. For instance energy, construction, investment, mining, intellectual property and aviation, among a lot of other industries. Most of these disputes often involve very technical matters and sophisticated legal issues. However, not every country has specialized courts or judges. Therefore, when courts lack the expertise to fully appreciate the complex factual, technical and legal issues at stake, a significant amount of time and resources may be required to break down the relevant technologies and laws to the courts.

Arbitration allows parties to choose an arbitrator or panel of arbitrators with specialized expertise. Specialist experts in law, technology or specific industries can be appointed as arbitrators. Parties also have the flexibility to choose a panel of specialists with expertise in different areas of the dispute. Such expert arbitrators can also utilize their know-how and experience to give guidance during the hearing ADR and to render a satisfactory resolution of the dispute. A good example is the arbitration process at the World Intellectual Property Organisation (WIPO) in terms of which intellectual property disputes are dealt with by experts specializing in IP. The appointment of capable experts provides benefits that would be otherwise non-existent through litigation.

Simple and flexible

The procedure of arbitration is often procedurally simple and versatile in comparison to litigation. Parties are free to agree on how the process will be conducted and they can choose suitable procedural rules. For example, parties can curtail the amount of documentary evidence discoverable in a dispute and even delineate the extent to which certain rules of evidence are to apply, if at all.

Time saving

Litigation usually tends to be protracted and time-consuming. This long-drawn out nature of legal proceedings may adversely affect parties’ rights. For instance, if intellectual property rights are of limited duration, such as patents, they may expire before the courts deliver a judgment.

Most national courts are clogged with backloads and stretched to their limit. Matters take months, and sometimes years, to be finalized. Parties can avoid overloaded courts by going to arbitration. In arbitration, there is no need to render time-consuming explanations of the technical and legal issues at stake because the arbitrators, by dint of their expertise, are already conversant with the complexities involved. The versatility and simplicity of arbitration leads to swift resolution of matters, especially when lengthy adjectival processes applicable in litigation are simplified.

 Affordable

Litigation can be very expensive. Lawyers charge by the hour and considering that the rigid adjectival procedures applicable to litigation can result in a long-winded hearing, the final bill can be hefty indeed. The cost of litigation is often exacerbated by appeals and concurrent cross-border litigation. The excessive cost of litigation in certain jurisdictions can make it extremely challenging for individuals or small businesses to enforce their rights or defend themselves against bigger entities.

Compared to legal proceedings, arbitration is a relatively affordable and accessible alternative. The cumulative effect of arbitration’s numerous advantages, allows for significant curtailment of costs.

Confidentiality

Frequently, parties are spooked by proceedings in public courts when trade secrets or confidential information, such as experimental results from research and development, are involved. Such sensitive information can be divulged to the public through the discovery process. This exposure can ruin parties’ business prospects.

Arbitration allows the parties to control and regulate disclosure and access to sensitive information. Parties can keep information confidential through non-disclosure agreements. Arbitral tribunals can also issue protective orders to bar parties from having access to confidential documents. Moreover, unlike litigation which is conducted publicly, the entire arbitral process and the resultant award can be kept confidential.

Finality

Invariably, arbitration culminates in binding awards that provide a certain and conclusive settlement the dispute. Court judgments can be reversed on appeal and in jurisdictions where the jury system is used; lay jurors without technical know-how may make wrong decisions.

On the other hand, arbitration awards are crafted to be final and conclusive. The appeals that are noted against arbitral awards rarely succeed. The courts are generally averse to dealing with appeals on the merits of arbitral awards because this would defeat the parties’ original intention to avoid court litigation.

Enforceability

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, known as the New York Convention has been described as the single most important pillar on which the edifice of international arbitration rests. It allows arbitral awards to be enforced in most countries around the world. In total, 157 states are party to this agreement thus making arbitral awards almost universally recognisable and enforceable.

  • Jacob Mutevedzi is a commercial lawyer and partner at Clairwood Chambers Attorneys and writes in his personal capacity. He can be contacted at +263775987784 or at jmutevedzi@gmail.com

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