When is it advisable to choose arbitration instead of a court of law?
Choosing the right forum for dispute resolution is crucial for effective conflict resolution. Arbitration, as an alternative form of dispute resolution, is gaining increasing recognition among businesses and multinational corporations. Why? There are specific situations in which arbitration proves to be more beneficial than proceeding in a court of law.
1. International and language disputes
For international disputes, arbitration is often preferred because of its linguistic flexibility and neutrality. The parties can agree on the language of the proceedings, which eliminates the language barrier that could impede communication and understanding in a court of law.
In addition, arbitration allows the parties to choose the venue and the law applicable to the dispute, giving them the opportunity to avoid the potential biases associated with a national court system. An example is disputes in the technology industry, where legal differences between jurisdictions can significantly affect the outcome of proceedings.
According to the International Centre for Arbitration (ICA), more than 70 per cent of arbitrations involving international disputes are conducted in English, confirming the attractiveness of arbitration in global conflicts.
2. Conflicts requiring industry expertise
Common law courts, while effective in many areas, do not always have the expertise necessary to understand complex industry disputes. Arbitration allows parties to select arbitrators who have experience and expertise in a specific field, such as construction law, energy or technology.
Such an opportunity minimises the risk of misunderstandings due to lack of knowledge of the specifics of the industry, resulting in more accurate and relevant settlements. An example is disputes over IT project contracts, where arbitrators familiar with the technology can better assess the evidence and arguments of the parties. For example, in a €5 million dispute involving the implementation of an ERP system, arbitrators with technology experience helped the parties save time and costs.
3. Situations where the timing of the decision is crucial
Time is money – especially in business. Court proceedings can drag on for years due to overloaded courts and the possibility of appeals. Arbitration, with its flexible procedure and single-instance nature, usually allows for a quicker conclusion to a dispute.
According to a report by the International Chamber of Commerce (ICC), the average time to resolve an arbitration dispute is 12-18 months, while court cases can take several to even several years depending on the jurisdiction. For example, in commercial contracts for the supply of goods, a quick resolution of a dispute can prevent serious financial losses and allow further cooperation between the parties.
4. Greater confidentiality than in a general court
Unlike court proceedings, which are generally public, arbitration offers a higher level of confidentiality. Details of the dispute, including documents and arbitrators’ decisions, can be kept confidential.
This is particularly important for disputes involving confidential data, trade secrets or company image. Through arbitration, companies can protect their reputation and avoid the media publicity that often accompanies court proceedings. For example, in a case involving the protection of patents on an innovative technology, arbitration made it possible to avoid disclosure of key information to competitors.
5. Limits to arbitration
While arbitration offers many advantages, it is important to remember that it is not an ideal solution for every situation. For example, the lack of possibility to appeal an arbitrator’s decision can be seen as a risk, especially in disputes with a very high value of the subject matter.
In addition, the costs of arbitration, especially in international proceedings, may be significantly higher than in common courts. In Poland, arbitration may be more cost-effective, but in international disputes, fees for arbitrators, hall rental or lawyers’ costs can accumulate significantly.
In addition, enforcing an arbitral award may be difficult in countries that are not parties to the 1958 New York Convention.
Summary: When is arbitration the best choice?
Arbitration is an advantageous solution in situations requiring:
- Neutrality and language flexibility in international disputes.
- Expert industry knowledge, crucial to understanding the specifics of the conflict.
- Rapid resolution, minimising the time and costs involved in the proceedings.
Confidentiality that protects the interests and image of the parties.
Each dispute requires individual analysis, but in the above-mentioned cases, arbitration is a tool that allows to effectively resolve the conflict, while taking care of the interests of both parties. In Poland, institutions such as the Arbitration Court at the Polish Chamber of Commerce are gaining popularity, confirming that arbitration is a viable alternative to traditional courts.
Although arbitration has many advantages, it is always advisable to consult a decision with our lawyer specialising in this form of conflict resolution. A professional analysis will help you assess whether arbitration is the optimal solution for your specific situation. Find out how our expert can help you – contact us for comprehensive support in arbitration matters.
