WHAT IS ARBITRATION IN CORPORATE DISPUTES?
Arbitration is a common method of ADR where the complaining parties and respondents accept to have their legal issues settled out of court with the assistance of a third party called the arbitrator. This process is legal, and the decision made by the arbitrator, known as an award, has similar force and effect to a court ruling. Arbitration is extensively used in commercial and corporate disputes relating to contractual and corporate governance, business breakdowns, shareholders’ disputes, mergers, licensing, patents, trademarks, copyrights, and international transactions. Currently, national laws and international conventions such as the New York Convention on the Recognition and Enforcement of the Foreign Arbitral Awards Act 1958 help ensure that awards can be enforced in over 170 world countries.
BENEFITS OF ARBITRATION IN CORPORATE DISPUTE RESOLUTION
- Confidentiality
The last possibility is also one of the main benefits of arbitration in corporate affairs, namely confidentiality. While court litigation is open to the public, arbitration hearings and awards are closed to the public, and thus cannot reveal information, business secrets, or corporate images to the public.
- Flexibility and Control
Arbitration is more flexible than courts since they are. They are all able to select which part of the process they would like, such as the amount and defence of arbitrators, the place of hearings, the laws of the country, and the language. This increases the chances of the process being tuned to suit the parties individually involved in the process.
- Overview of the principle of neutrality in international disputes
For the multinational corporation, arbitration is preferred as it is an independent table that resolves any problems. In contrast to dealing with foreign courts, which may have certain biases, parties can only invite professional arbitrators who are familiar with the subject of the proceedings and other legal and business aspects; therefore, arbitration is especially appealing in international disputes.
- Expert arbitrators
In arbitration, the parties have the right to select arbitrators who have some specific expertise regarding the issue in question. This is especially helpful in large corporate matters where almost all aspects of industry laws are required, like intellectual property or financial regulations.
- Efficiency and Speed
Arbitration is quicker than typical court proceedings because it avoids certain process steps of the courts. Sometimes parties can set dates when the hearing will be held, and many institutions enable fast tracks, which makes business corporations proceed with the same quick resolution of their issues.
- Enforceability of Awards
Today because of the New York Convention, awards made are enforceable in most of the world, making it easier for the decentralized corporations to obtain judgments across borders. This enforceability makes arbitration a practical method of resolving disputes involving international parties.
CHALLENGES OF ARBITRATION IN CORPORATE DISPUTE RESOLUTION
- Costs
Arbitration, which is normally regarded as being cheaper, can indeed prove rather costly, particularly when the corporate clash is a large one. Arbitrators’ fees and administrative costs are also costly affairs that parties must meet whenever they are involved in the process. Large corporations may not mind these costs so much, while for small corporations they may be a big inconvenience.
- Limited Appeal Options
Many refer to arbitration for the finality of awards that it presents, hence the call for a review of this learning. Arbitral awards are different from court judgments because, in most cases, the awards contain a clause that cannot be appealed against. This makes the issue of appeals difficult, especially when one feels that a certain decision was arrived at improperly.
- Potential for Bias
Even though arbitrators should not be biased, there are always possibilities of bias, especially when one party chooses his/her arbitrator. The same arbitrators being appointed in multiple cases by the same corporate parties can breed suspicion of bias, regardless of its existence or not.
- Lack of Precedent
Arbitration awards, unlike court decisions, do not add up to case law, although the parties can use them as a basis for appeal. What this means in essence is that the lack of jurisprudence that arises when past awards do not cover similar cases may create MD for organizations involved in similar activities.
- Enforcement Challenges in Certain Jurisdictions
It should also be noted that the enforcement of some provisions presents considerable difficulties in some countries. Even where the New York Convention provides for the general enforceability of the awards by international reciprocal convictions, certain jurisdictions may decline enforcement of an award under local public policy or procedural violation. This can be problematic, particularly in countries that may lack well-developed infrastructure or may not be implementing their laws as expected.
RECENT TRENDS IN CORPORATE ARBITRATION
- ODR as a new approach to dispute management
ODR has been found to have increased with the help of technology, especially during the COVID-19 outbreak. Technology advances mean that it is now possible to have virtual hearings, thus cutting transport costs and enhancing access. ODR supplements the existing systems and has been embraced more in international arbitration.
- The institutional reforms for efficiency roles Part B, Part C, Part D
As for international arbitration, many institutions, such as the ICC, LCIA, or SIAC, have introduced changes to make the arbitration more effective. These changes entail shortening of time frames, control of costs, and provision of streamlined procedures for smaller disputes handling some of the matters that have been considered vices about time and money.
- Third-party Funding in Arbitration
Third-party funding, whereby outside financiers bear the expenses of the arbitration in return for a cut of the damages awarded, is also gradually emerging. While this can help corporations with high legal fees to be relieved from the legal costs, this practice is seen to have potential conflicts of interest that may see the funders taking control over the arbitration processes.
- Diversity in Arbitration
Sensitization on diversity in arbitration is now on the right track, with institutions as well as corporations looking forward to appointing arbitrators with more diverse backgrounds. This push towards diversity is an attempt to fight the hegemonic tendencies that organize arbitrator-appointing processes and increase neutrality.
CONCLUSION
Arbitration thus has a central part in coping with corporate disputes, mainly because it is an effective form of dispute resolution rather than litigation. The drawbacks of the process are numerous, but its benefits are equally significant: confidentiality, flexibility of the process, choice of arbitrators, and the process suits the largest business organizations of the modern globalized world dealing with multifaceted legal issues. Arbitration is more efficient and can take less time to arrive at a resolution; thus, it will suit the faster pace of business today. Also, recognition and enforcement of the awards under the New York convention gives companies a secure path to obtain cross-judgment.
But corporations must not forget the problems that are linked with arbitration. Several challenges are characteristic of arbitration, including high costs, lack of choice of appeal, and potential bias. Furthermore, there is uncertainty about what precedent means in future disputes, and this makes businesses unable to make the correct expectations. With such changes as online dispute resolution, changes to institutional procedures, and the diversification of appointing arbitrators, these systems should take a closer look at the advantages and disadvantages of arbitration. Thus, they can benefit from the strengths of arbitration while avoiding its drawbacks in terms of using it as an effective instrument in the setting of the growing volume of corporate disputes in the global world.
Author(s) Name: S M Nawaz Ahmad (Chandigarh University, Mohali, Punjab)
