What is Ad Hoc Arbitration?
Ad hoc arbitration is a dispute resolution process that takes place outside of any established arbitral institution. In ad hoc arbitrations, the parties involved agree on appointing an arbitral tribunal and conduct the proceedings according to their own rules. This differs from institutional arbitration, where an arbitral institution provides rules and procedures for arbitration.
The parties in ad hoc arbitration have greater flexibility in choosing the arbitrators, setting procedural rules, and determining the timetable for resolving disputes. However, this also means there is no formal appointing authority or supervisory body to oversee the proceedings.
An ad hoc arbitration agreement may be included as a clause in a contract between parties or entered into after a dispute arises. The final award issued by the arbitral tribunal is binding on both parties and can be enforced by a court.
Benefits and Drawbacks of Ad Hoc Arbitration
Advantages of using ad hoc arbitration over institutional arbitration
Ad hoc arbitration is a form of dispute resolution not administered by an institution. Instead, the parties involved in the dispute appoint an arbitrator or a panel of arbitrators to resolve their claims. Here are some advantages of using ad hoc arbitration over institutional arbitration:
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Flexibility: One significant advantage of ad hoc arbitration is its flexibility. The parties can tailor the process to their specific needs and requirements, which allows for more creativity and efficiency in resolving disputes.
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Cost-effectiveness: Ad hoc arbitration can be significantly less expensive than institutional arbitration because it has no administrative fees or charges. Moreover, since the parties can control the process, they can limit costs by avoiding unnecessary procedures.
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Potential for faster resolution: Since an institution imposes no procedural rules, ad hoc arbitrations tend to move more quickly than institutional arbitrations.
Disadvantages of using ad hoc arbitration over institutional arbitration
While there are benefits to using ad hoc arbitration, there are also some drawbacks that parties should consider before choosing this method:
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Risk: Ad hoc arbitrations come with a higher risk than institutional arbitrations since no established rules or procedures govern the process. As such, it’s essential that parties have experienced counsel who can guide them through the process.
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Costs: While cost-effectiveness was listed as an advantage above, it can also be a disadvantage if one party takes advantage of the lack of procedural guidance and prolongs proceedings unnecessarily.
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Claims may not be enforceable in certain jurisdictions: Some countries may require that arbitral awards be made by institutions recognized under local law. An award made through ad-hoc proceedings may not be enforceable in these cases.
How Does Ad Hoc Arbitration Work?
Initiating an Ad Hoc Arbitral Proceeding
Ad hoc arbitration is a form of dispute resolution where the parties agree to arbitrate their dispute without relying on an established institution or set of rules. The process begins with the parties deciding to include an ad hoc arbitration clause in their contract. This clause outlines the procedure for initiating an ad hoc arbitral proceeding, including choosing an arbitrator and establishing the seat of arbitration.
Once a dispute arises, either party can initiate the ad hoc arbitral proceeding by sending a notice of arbitration to the other party. This notice will need to include details about the nature of the dispute and any claims being made. The responding party then has a set amount of time to respond to this notice and appoint its arbitrator.
Role of the Arbitrator in an Ad Hoc Arbitral Proceeding
In ad hoc arbitration, the arbitrator is crucial in resolving disputes between parties. Unlike institutional arbitration, where established rules and procedures govern how disputes are resolved, ad hoc arbitration allows for more flexibility in how proceedings are conducted.
The arbitrator’s role is to hear evidence from both sides and make a final decision based on that evidence. They have broad discretion, including setting deadlines for submissions, issuing orders for discovery or disclosure of documents, and deciding what evidence should be admitted.
Enforcement of Awards in an Ad Hoc Arbitral Proceeding
Once the arbitrator has issued a final award, it must be enforced by state courts. However, enforcement can be complicated.
To enforce an ad hoc award, parties must apply directly to national courts where assets are located or where enforcement is sought. It is important that parties choose seats that are signatories to international treaties such as the New York Convention, making enforcing ad hoc awards easier.
Best Practices for Ad Hoc Arbitration
In conclusion, ad hoc arbitration can be an effective alternative to institutional arbitration. It provides parties with greater flexibility and control over the arbitration process. However, it also has its drawbacks, including the potential for delays and lack of procedural guidance.
To ensure a successful ad hoc arbitration, parties should consider the following best practices:
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Clearly define the scope of the dispute and establish clear procedures for selecting arbitrators.
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You should set up clear rules for conducting proceedings, including deadlines for submissions and evidence.
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Could you consider appointing a neutral administrator to help with administrative tasks?
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Please make sure that arbitrators have enough expertise in the subject matter of the dispute.
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Could you consider incorporating provisions for emergency relief or interim measures?
By following these best practices, parties can increase their chances of successful ad hoc arbitration.
FAQs
Q: Is ad hoc arbitration suitable for all types of disputes?
A: Ad hoc arbitration is generally most suitable for relatively straightforward disputes and does not require extensive procedural guidance.
Q: How long does ad hoc arbitration typically take?
A: The duration of an ad hoc arbitration can vary depending on the complexity of the dispute and other factors such as arbitrators’ availability and scheduling conflicts.
Q: What is the role of an administrator in ad hoc arbitration?
A: An administrator in ad hoc arbitration can assist with various administrative tasks such as communicating with parties, scheduling hearings, and managing documents.
Q: Can parties appeal an award in ad hoc arbitration?
A: Appeals in ad hoc arbitrations are generally limited or non-existent unless specifically provided for by agreement between parties.
Q: How much does it cost to conduct an ad hoc arbitration?
A: The costs of conducting an ad hoc arbitration can vary greatly depending on various factors such as arbitrator fees, administrative costs, and legal fees.
