WHAT ARE THE ADVANTAGES IN RESOLVING DISPUTES THROUGH

ARBITRATION? IN THIS CONTEXT DISCUSS THE ADVANTAGES OF DISPUTE

RESOLUTION THROUGH ARBITRATION RATHER THAN THROUGH
LITIGATION IN COURTS.

It is well settled that owing to nature of human beings and the number of activities

engaged into makes dispute and conflicts inevitable. The traditional method of resolving these

disputes is through litigation. Courts exist and are maintained by the state to provide a dispute

settlement service for parties. It is a manifestation of state power and the responsibility of the

state to ensure that courts exist, that appropriately qualified judges are appointed, that there are

procedural rules to regulate the basis of jurisdiction and the conduct of cases before the court.

However, litigation in different jurisdictions has never been found to be perfect in

resolving disputes. With attendant problems pervading litigation such as overcrowded cause-list,

unduly cumbersome procedure, unwholesome technicalities, its expensive nature and

unprecedented bureaucracy has led to calls for reforms and alternatives for resolving disputes.

Arbitration which is a procedure for resolving disputes through which parties in disputes

appoints a person(s) who shall be preceding over them and any decision made by the appointed

person(s) shall be final and legally binding, has come to remedy the flaws of litigation.

Alternative Dispute Resolutions (“ADR”), such as arbitration or mediation, have

become popular methods for settling disputes among parties today. Entities and individuals are

more frequently choosing to forego the process of the traditional court system for the resolution

of disputes by entering into agreements containing arbitration provisions.

 Arbitration is a method of resolving disputes outside of court whereby an arbitrator

employed by the parties will listen to the arguments of the parties, review the evidence and issue

a decision that is generally final and binding on the parties. Considering the prevalence of

arbitration clauses in contracts today, it is imperative that parties consider the advantages and

disadvantages of arbitration proceedings and make an informed decision before entering into

such an agreement.

ADVANTAGES OF ARBITRATION

Cost. Generally, arbitration proceedings will result in quicker dispute resolution than in the court

system. This, in turn, results in lower overall costs. In addition, only limited discovery is allowed

in arbitration, which greatly helps to reduce the costs of reaching a resolution.

Informality. Arbitration proceedings are far less formal than a trial. Unlike trials, which must be

held in a courtroom, parties can agree to have arbitrations in any convenient setting of their

choosing. The rules of procedure and evidence are greatly relaxed and simplified, making the

overall process much less formal than a typical trial and giving the parties more control.

 Privacy. Arbitration proceedings are generally held in private, and parties can agree to keep the

final resolution confidential. This is especially appealing if the subject matter of the dispute

involves private or embarrassing information.

Control. Parties have the ability to maintain greater control over the dispute resolution process

through arbitration. The arbitrator is selected by the parties. Unlike in a trial, where the judge or

jury may know very little about the subject matter of the dispute, the parties to arbitration have
the ability to select an arbitrator with expertise in a certain area, which may lend to a more

equitable and informed decision. Additionally, the parties can generally select and stipulate as to

the legal and procedural rules that will govern the process.

REASONS WHY ARBITRATION TRIUMPS OVER LITIGATION

1. Predictability: A frequent complaint of courtroom litigation is that some judges do

not understand the nature of certain complicated disputes, often leading to unpredictable and

unsatisfactory results. Ideally, arbitration is heard by a third-party neutral or neutrals with

experience and knowledge in the area of dispute. Arbitrators do not have to be lawyers and many

times can be engineers, architects, contractors or developers. This characteristic of arbitration

can eliminate the substantial problems and time involved in educating a judge or jury in the

nuances of construction.

2. Speed: As a public process, Litigation must adhere to laws and regulations set out to

satisfy public notions of justice throughout case prosecution. A lot of time is required to file

documents in support of a case, give notices appropriately and all other activities associated with

pre-trial. Also, activities of the trial itself, hearings, judgments, and the benefit of appeal to

higher courts by dissatisfied litigants take a lot of time. This slows down the dispensation of

justice resulting in unnecessarily long cases. Because there is no crowded court docket, an

arbitration hearing can often be scheduled in a matter of months, not years. Even when millions

of dollars are at stake, generally hearings can be scheduled more quickly than a court hearing. In

addition, there are fewer and more restrictive grounds for appealing an arbitration award, so

finality is the rule rather than the exception.

 3. Costs: In most cases, the costs and expenses of arbitration are less than litigation.

Because litigation is often criticized for the time and expense of pretrial discovery, it is

significant that, with a few exceptions, discovery is limited in arbitration. The absence of

prehearing motions and multiple depositions, as well as the finality of the decision, can reduce

attorneys’ fees and costs.

4. Confidentiality: Unlike courtroom litigation, arbitration is private and confidential.

The proceedings are not public records. Arbitrators maintain the privacy of the hearings unless

some law provides to the contrary. Arbitration is usually in private and awards, which are the

final decisions of arbitration panels, are not published. Court proceedings are usually open to the

public and there are also established platforms for reporting court judgments. Arbitration

guarantees the privacy of the parties and the confidentiality of the dispute, unlike litigation where

anybody is free to attend court proceedings.

5. Formalities: Arbitration is less formal than Litigation. As such, rigid evidentiary

rules are diminished but procedural rules may be based on institutional rules, agreement by

parties or discretion of the arbitrators. While in litigation, formal and strict evidential as well as

procedural rules are prescribed as against the flexibility enjoyed in arbitration proceedings.

6. Involvement by parties: In arbitration, parties have control over choice of

arbitrators, language, schedule, venue, applicable law, procedural rules etc. while in litigation;

parties do not exercise such control over the process.

7. Decisions: A unique feature of arbitration is that its decisions known as awards are

final and binding on the parties and are non-appealable. However, Court judgments are subject to

a long trail of appeal ending at the Supreme Court.

 8. Flexibility: Whereas Arbitration is a flexible process. As a private tribunal for parties

in dispute, proceedings can be arranged to accommodate the convenience of the parties. From the

onset, parties and arbitrator(s) can set out a program that is convenient for them in every way

(especially cost). All Arbitrators are also expected to conduct proceedings diligently and

efficiently in a timely manner.

9. Fairness: Another attraction Arbitration offers, is that the unsuccessful party bears

the cost of the arbitration. This is not a sanction on the unsuccessful party, but rather, an

indemnity against the costs the successful party had to incur because the unsuccessful party was

wrong. This also reduces expenses incurred by the successful party. Costs may also be shared in

proportions determined by the arbitral tribunal. This happens when neither disputing party wins

completely on claims presented. Costs will be awarded in favor of a party on their successful

claims, and against them were unsuccessful. A party may also be compelled to bear extra

expenses that arise as a result of undue delay he or she creates.

Sources:

Abraham Lincoln, American President, 1861-1865, Pine, J. (ed.), Wit and Wisdom of American

Presidents, (Dover Publications, Inc., Mineola, New York, 2002), p. 27

Gunter Henck v. Anre & Co. Cie (1970) 1 Lloyd’s Rep. 235

United Nations Conference on International Arbitration: Convention on the Recognition and

Enforcement of Foreign Arbitral Awards.

FINALITY IN ARBITRATION AWARDS. PLEASE DISCUSS THE REASONS WHY
AN ARBITRATION AWARD OUGHT TO BE EASY TO ENFORCE IN AN
INTERNATIONAL CONTEXT. ANALYZE AND RESEARCH THE ISSUES
RELATING TO ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN THE
CONTEXT OF EXISTING INTERNATIONAL CONVENTIONS (NEW YORK
CONVENTION).

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the

New York Convention, or the Convention) was prepared under the auspices of the United

Nations and adopted on 10 June 1958 at United Nations Headquarters in New York. The

Convention is now hailed as ‘one of the most important and successful United Nations treaties in

the area of international trade law, and the cornerstone of the international arbitration system’

thus it is ought to be easy to enforced in an international context.

The primary goal of the drafters of the Convention was to overhaul the existing regime

under the Convention on the Execution of Foreign Arbitral Awards signed in Geneva in 1927 to

remove unnecessary obstacles to recognition and enforcement, and to maximize the circulation

of foreign arbitral awards. To achieve this goal, the drafters (1) created a presumption as to the

binding nature of awards, (2) repealed the double exequatur requirement, (3) reversed the burden

of proving the conditions for recognition and enforcement, and (4) permitted the courts of

contracting states to exercise their discretion to refuse recognition or enforcement of foreign

arbitral awards based on the grounds listed in Article V.

Key to the success of the Convention is the foresight of its drafters in laying down strict

conditions for recognizing and enforcing foreign arbitral awards, while leaving contracting states

free to apply more liberal rules for recognition and enforcement. In this respect, the Convention
is a forward-looking instrument, which has been able to evolve and keep pace with the

tremendous growth of international arbitration since it was adopted.

There is no definition of the term “arbitral award” in the Convention. Therefore, it is for

the courts to determine what the term means for the purposes of the Convention. They must do

so in two steps:

1. First, they must review whether the dispute had been submitted and resolved by

arbitration. Not all out-of-court dispute-settlement methods qualify as arbitration. There are a

variety of dispute settlement mechanisms involving private individuals that do not have the same

characteristics as arbitration. Mediation, conciliation or expert determinations are a few

examples. The New York Convention covers only arbitration.

2. Second, they must review whether the decision is an award. Arbitral tribunals may

issue a variety of decisions. Some of them are awards, others are not. Courts have adopted two

different methods to determine the meaning of the terms “arbitration” and “award”. They either

(1) opt for autonomous interpretation or (2) refer to national law using a conflict-of laws method.

The first step is to inquire whether the process at issue qualifies as arbitration. Arbitration

is a method of dispute settlement in which the parties agree to submit their dispute to a third

person who will render a final and binding decision in place of the courts. This definition stresses

three main characteristics of arbitration. First, arbitration is consensual: it is based on the parties’

agreement. Second, arbitration leads to a final and binding resolution of the dispute. Third,

arbitration is regarded as a substitute for court litigation.

 The second step is to review whether the decision at issue is an award. An award is a

decision putting an end to the arbitration in whole or in part or ruling on a preliminary issue the

resolution of which is necessary to reach a final decision. An award finally settles the issues that

it seeks to resolve. Even if the tribunal would wish to adopt a different conclusion later, the issue

cannot be reopened or revised.

Consequently, the following arbitral decisions qualify as awards:

– Final awards, i.e., awards that put an end to the arbitration. An award dealing with all

the claims on the merits is a final award. So is an award denying the tribunal’s jurisdiction over

the dispute submitted to it;

– Partial awards, i.e., awards that give a final decision on part of the claims and leave the

remaining claims for a subsequent phase of the arbitration proceedings. An award dealing with

the claim for extra costs in a construction arbitration and leaving claims for damages for defects

and delay for a later phase of the proceedings is a partial award (this term is sometimes also used

for the following category, but for a better understanding, it is preferable to distinguish them);

– Preliminary awards, sometimes also called interlocutory or interim awards, i.e., awards

that decide a preliminary issue necessary to dispose of the parties’ claims, such as a decision on

whether a claim is time-barred, on what law governs the merits, or on whether there is liability;

– Awards on costs, i.e., awards determining the amount and allocation of the arbitration

costs;

– Consent awards, i.e., awards recording the parties’ amicable settlement of the dispute.
 An award issued by default, i.e., without the participation of one of the parties, also

qualifies as an award to the extent it falls within one of the categories listed above.

By contrast, the following decisions are generally not deemed awards:

– Procedural orders, i.e., decisions that merely organize the proceedings;

– Decisions on provisional or interim measures. Because they are only issued for the

duration of the arbitration and can be reopened during that time, provisional measures are not

awards. Courts have held the contrary on the theory that such decisions terminate the dispute of

the parties over provisional measures, but this is unpersuasive: the parties did not agree to

arbitration in order to resolve issues of arbitral procedure.

Finally, the name given by the arbitrators to their decision is not determinative. Courts

must consider the subject matter of the decision and whether it finally settles an issue in order to

decide whether it is an award.

Sources:

http://www.globalarbitrationreview.com

https://www.arbitration-icca.org/

ICCA’S (INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATTION) Guide

to the Interpretation of the 1958 New York Convention: A Handbook for Judges.
THIRD PARTY FUNDING IN INTERNATIONAL ARBITRATION. SHOULD
INSTITUTIONS ALLOW THIRD PARTY FUNDING IN INTERNATIONAL
ARBITRATION? PLEASE ANALYZE THE ADVANTAGES AND THE
DISADVANTAGES OF ALLOWING SUCH THIRD PARTY FUNDING.

Third party funding is not new. Originally designed to support companies that did not

have the means to pursue claims, its use has broadened to the extent that it has become a feature

of the litigation landscape in several jurisdictions.

Unlike in national litigation where disputes are decided by court appointed judges, the use of

third party funding in private arbitration, with party-appointed arbitrators, has given rise to

various ethical and procedural issues.

Third party funding, as defined, refers to an act where someone who is not involved in

arbitration provides funds to a party to that arbitration in exchange for an agreed return.

Typically, the funding will cover the funded party's legal fees and expenses incurred in the

arbitration. The funder may also agree to pay the other side's costs and provide security for the

opponent's costs if the funded party is so ordered.

As the use of third-party funding has increased, so have the number and range of

institutions that are prepared to finance litigation and arbitration. In Third party funding, or

"litigation finance" as it is commonly referred to, has evolved. In addition to funding one-off

cases, litigation finance is being used for a broader range of purposes, with the proceeds of the

litigation or arbitration being used as collateral.

A potential claimant may approach a funder for various reasons:

 (1) Necessity - Arbitration can be expensive. If a claimant does not have the means to

pursue a meritorious claim, funding may well be its only option.

(2) Risk management - Claimants with the funds to arbitrate may want to lay off some of

the risk associated with costly arbitration, and the inherent unpredictability of costs, and be

prepared to give up a proportion of any recoveries to do so. It also enables a company to invest

that money elsewhere. In addition, the funded party is relieved of costs pressures and cash-flow

issues associated with the legal costs of the arbitration.

(3) Validation - Funders are only interested in good claims. They will therefore conduct

extensive due diligence and carry out their own analysis of the merits before agreeing to provide

funding. This objective analysis may assist the claimant to shape its case strategy, and may also

encourage early settlement once the other party is made aware that the claim has the backing of a

funder.

However, against those benefits, here are its disadvantages:

(1) Expensive - A successful claimant will generally have to pay a significant proportion

of damages recovered to the funder.

(2) Autonomy - Although funders are generally prohibited from taking undue control or

influence in an arbitration, there may be some loss of autonomy on the part of the funded party

(in particular when considering settlement) as funders may reserve the right of approval of the

settlement.
 (3) Disclosure - Funded parties are being required to disclose the fact of funding and the

identity of the funder. This in turn may prompt the respondent to make an application for

security for costs.

(4) Costs - Substantial costs can be incurred when packaging the case for presentation to

a funder. These will have been wasted if the application for funding is unsuccessful. Even if

successful, funders are not usually liable for any costs incurred before the funding arrangement is

put into place, including the costs of packaging and the negotiation of the funding arrangements.

Although a lot of issues must be addressed before entering in a third-party funding, it

must still be allowed since its advantages outweighs the disadvantages - providing an access to

justice for under-resourced parties enabling them to pursue proceedings which a lack of

financing would otherwise have prevented. For parties that are adequately resourced, funding can

offer a more convenient financing structure, allowing capital which would otherwise be spent on

legal fees to be allocated to other areas of their business during the proceedings. Nonetheless,

third-party funding must still be allowed.

Sources:

https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide---third-party-funding-

in-international-arbitration/

https://www.nortonrosefulbright.com/en-gb/knowledge/publications/6c843d32/the-third-party-

funding-debate---we-look-at-the-risks
 SUMMARY

Based on the discussions above, an arbitration is a proceeding used to resolve disputes

outside the courts that will be decided by one or more persons whom renders the arbitration

award which is legally binding on both sides and enforceable in the courts. It is and efficient and

fair remedy that both parties can save time, money and energy in settling disputes just like in a

court litigation process. This alternative dispute resolution has its own limitations such as

aggrieved party cannot appeal; it is like take it or leaves it principle wherein both parties will

settle peaceably.

Arbitration accords arbitral-tribunal to rule on the issue of its own jurisdiction to decide a

dispute submitted to it for decision, including any objection with respect to the existence or

validity of the arbitration agreement in line with the state policy to respect party autonomy, with

the greatest cooperation and least intervention from the courts. In other words, the parties have

agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration bearing in

mind that such arbitration agreement is the law between the parties and that they are expected to

abide by it in good faith.

In the end, the success or failure of the process of Arbitration lies with the commitment

of both parties to submit themselves to the process to reach a negotiated settlement agreement.
GROUP MEMBERS: (IV-ARELLANO)

DIRAMPATUN, NAIRA H.

BANDING FATMA SAHRA C.

BAYOYOS-ORBE, JULIEVE

DARUNDANDAY, SHEILA MAE

JAVERLE, CATTLEYA JADE A.