What is Ad Hoc Arbitration
Ad hoc arbitration, also referred to as non-administered arbitration, is a dispute resolution process where the parties themselves organize the arbitration instead of using the services of an established arbitration institution.
In ad hoc arbitration, the parties mutually decide on the rules and procedures to govern the arbitration proceedings and directly appoint a suitable arbitrator or arbitral tribunal rather than having an institution administer the case.
Some key features of ad hoc arbitration include:
- No oversight from an administering institution
- Parties have control over procedural rules and appointment of arbitrator(s)
- Proceedings are organized by the parties and arbitral tribunal
- Relies on cooperation between parties to function smoothly
Ad hoc arbitration is often more flexible but has fewer support structures than institutions administered by organizations like ICC, LCIA, etc.
Key Differences from Institutional Arbitration
Ad hoc arbitration differs from institutional arbitration in some key aspects:
| Ad Hoc Arbitration | Institutional Arbitration |
|---|---|
| No supervising institution | Administered by an arbitration institution |
| Parties decide rules and appoint arbitrator(s) | Existing procedural rules apply |
| Arbitrator(s) organize proceedings | Institution provides admin support |
| Lower admin costs but higher effort for parties | Higher admin fees but less effort for parties |
| Outcomes can lack consistency | More transparency and oversight |
While ad hoc arbitration offers more control over the process for parties, institutional arbitration provides an established framework and support from the administering institution.
When Ad Hoc Arbitration May Be Preferred
There are certain situations where parties may prefer using ad hoc arbitration over institutional arbitration:
Smaller, Less Complex Disputes
The flexibility and lower costs of ad hoc arbitration can benefit the resolution of smaller disputes between parties with an ongoing business relationship.
Concerns Over Sovereignty
States may prefer ad hoc arbitration to retain more control over resolving sensitive disputes.
Desire for Cost and Time Savings
Parties trying to resolve disputes quickly and efficiently may opt for ad hoc arbitration to avoid administrative delays and fees.
Industry Norms
In certain sectors like maritime arbitration, ad hoc arbitration is more common based on established industry practices.
Challenges and Risks of Ad Hoc Arbitration
While offering many benefits, opting for ad hoc arbitration also comes with some inherent challenges and risks such as:
- Ambiguity in agreed procedural rules
- Lack of established practices and procedures
- Over-reliance on cooperation between the parties
- Potential delays if parties fail to cooperate
- Limited avenues for challenging arbitral awards
- Risks in enforcement of awards in certain jurisdictions
To mitigate these risks, parties must pay special attention while designing the ad hoc arbitration framework.
Best Practices in Ad Hoc Arbitration
To ensure a smooth ad hoc arbitration process, parties should follow certain best practices:
Carefully Draft Arbitration Agreement
- Clearly define arbitration scope and procedures
- Specify the method for appointing arbitrator(s)
- Include provisions for replacing arbitrators
Establish Comprehensive Procedural Rules
- Ideally, adopt existing rules like UNCITRAL rules.
- Provide for exchange of documents, hearings, expert evidence, etc.
Appoint Experienced Arbitrator(s)
- Relevant expertise in the subject matter
- Availability and ability to organize proceedings
Consider Appointing a Neutral Administrator
- Manage documentation, coordinate logistics, etc.
- Especially for complex or high-value disputes
By planning carefully and following best practices, parties can benefit from ad hoc arbitration’s flexibility while minimizing procedural risks.
Frequently Asked Questions
Is ad hoc arbitration suitable for all disputes?
No. For small or less complex disputes between parties with ongoing relationships, ad hoc arbitration can work well. For higher-value disputes, institutional arbitration provides better support.
How long does ad hoc arbitration take?
Duration depends on cooperation between parties and arbitrator(s) availability. But ad hoc arbitration can resolve disputes faster than litigation in courts, taking months rather than years.
What is the role of an arbitrator in ad hoc arbitration?
Arbitrators have a key role in organizing proceedings, managing documentation, conducting hearings, assessing evidence, and delivering binding decisions in the absence of an administering institution.
Can a party appeal an arbitral award?
Opportunities to appeal are usually limited in arbitration. But parties can approach courts in limited cases like perversity of award or procedural irregularity. Enforcement also depends on applicable laws.
Is ad hoc arbitration cheaper than institutional arbitration?
Usually, yes, since there are no administrative fees. However, parties may incur higher costs in appointing arbitrators and organizing proceedings. Overall, ad hoc arbitration has lower costs in most cases.
