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BLOG: What businesses should know about arbitration

Jonathan Choo | June 12, 2012
Arbitration is an established and effective method of dispute resolution that parties can choose to resolve their commercial disputes.

This week, Singapore plays host to the biggest arbitration roadshow this year when the 21st International Council for Commercial Arbitration (ICCA) Congress rolls into town.

Ten years ago, few businesses in Asia would have even heard of arbitration let alone considered using it as a method to resolve their disputes. I now see arbitration clauses being written into contracts and parties referring their disputes to arbitration on a far more regular basis. The Singapore International Arbitration Centre (SIAC) handled almost twice as many new cases in 2011 (188) as it did in 2009 (99). The trend is set to continue as international businesses already familiar with arbitration start to channel more and more of their investments into Asia and Singapore. In theory at least, this should translate to a greater awareness within the business community here of what arbitration is and the benefits of using it to resolve commercial disputes.

And yet, when I speak to business owners, CEOs, CFOs and even in-house legal counsel about arbitration, I find that while they may have heard the term or even included arbitration clauses into their own contracts, most of them know very little about what it really is.

1. Arbitration should not be confused with Mediation

There's a good reason why I've started this list by explaining what arbitration is not - I find that nine out of 10 business people that I speak to about arbitration tend to confuse it with mediation, or they think that it involves some form of hush-hush settlement negotiations. Make no mistake - arbitration is not the same thing as mediation, nor is it a settlement negotiation.

2. Arbitrations result in binding awards

Arbitration is an established and effective method of dispute resolution that parties can choose to resolve their commercial disputes.

Parties who choose to arbitrate their dispute submit their legal arguments and evidence to an arbitral tribunal in accordance with a pre-agreed set of arbitration rules, e.g. the SIAC Rules. Parties then participate in an arbitration hearing after which the tribunal decides the outcome of the dispute. The tribunal's decision is issued to the parties in the form of a written award. Parties in an arbitration can (and often do) try to settle their dispute right up to the day before the tribunal's award is issued. But if there is no settlement and the tribunal issues an award, the parties involved in the arbitration are bound by that award.

3. Arbitral awards are enforceable virtually worldwide

This is perhaps one of the most significant advantages that arbitration has over court litigation. There are usually procedural difficulties in trying to enforce a local court judgment against a party based abroad. However, under the New York Convention of 1958 which more than 140 countries have signed up to, arbitration awards issued in a contracting state can generally be enforced in any other contracting state without too much difficulty. In Asia, countries such as Vietnam, South Korea, Japan, Thailand, Malaysia, Laos, India, China, Philippines, Indonesia and of course Singapore have all signed up to the New York Convention of 1958.


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