Arbitration is an Alternative Dispute Redrassal mechanism in which an impartial adjudicator, with the consent/agreement of the parties, resolves the disputes between them by delivering a binding decision known as the arbitral award, between the parties. There could be a sole arbitrator or more, maximum number being three ( generally odd to avoid ties ), knwon as the arbitrator tribunal. The arbitrator could be the choice of the parties or could be appointed by the court according to their qualifictions and expertise in a particular field, keeping in mind the nature and requirements of the case or by the existing tribunal members. A submission agreeement allows the parties to refer an existing dispute to arbitration and in case of a future dispute, an arbitrtation clause in the agreement serves the purpose. The entire arbitration process is kept confidential and its outcome idependent, free from the interference of the courts.
The advantages of arbitration can be discussed uder the following heads :
- CHOICE OF DECISION MAKER : unlike conventionl court proceedings where the judge, whi is not the choice of the parties, is the final decision maker, in arbitration the arbitastor/ aritrators can be of the choice of the parties.
- FASTER PROCESS : one of the main advantegaes of ADR over litigation is that it is time efficient as compared to normal court proceedings which might take years and years to reach a final outcome.
- CONFIDENTIALITY : the privacy of the proceedings are maintained at all costs and this confidentiality is ensured from both ends - from the parties' as well as the adjudicator's.
- CONVINIENT PROCEDURE : the arbitration proceedings can be called at any convinient place, at any convinient time according to the wishes of the parties, the adjudicators and the witnesses.
- FLEXIBLE : the proceedings could be dragged or simplified and made short according to the needs and desires of the parties.
- FINALITY : there lies no right of appeal with the parties generally after the after the final decision of the arbitrator.
The disadvantages of arbitration can be discussed under the following heads :
- COST INEFFECTIVE/HIGH REMUNERATION AMOUNT : if the arbitrator is a private one, then the remuneration of the arbirator could sore high, maxmum limit being ten percent of the claim.
- SPLITTING THE BABY : provided the relaxation in the the rules of arbitration and the presentation of evidences, sometimes the arbitrator inspite of delivering the award in one parties' favour, splits the baby by imparting the award in such a way so as to satisfy both the parties. This could be unfair to the party whose side is stronger and in whose favour the award should have been delivered.
- LIMITED RIGHT OF APPEAL : there is no right of appeal after an arbitral award has been dellivered except in cases of utter misconduct or fraud. If the arbitrator is inefficeient in his work, this might significantly affect the parties. The worst part being the parties would have no further remedy in such a case.
- NARCOTIC/CHILLING EFFECTS : chilling effect occurs when the parties refuse to compromise on their claims in order to arrive at a mutually agreeable settlement. Narcotic effect means the over dependence of the parties on the arbitrator thus impairing their ability to negotiate.
- AUXILLIARY AGREEMENTS : arbitarion agreements are generally included in small portions or writings that are barely visible to the naked eye and thus the consumersof the product become a party to the arbitration agreement without knowing about it beforehand.