In Part One of this blog we introduced you to formal arbitration — a way to resolve a dispute with your contract partner without going to court. We also explained that arbitration offers many advantages over litigation, including the worldwide recognition and enforceability of your arbitration agreement and award, as covered in Parts One and Two. In this part, we’ll cover some of the other reasons to strongly consider arbitration for resolving intractable disputes, and touch briefly on how to go about it.
Disputes often require specialized knowledge to understand fully — knowledge a local court judge may not have. Arbitration gives you the opportunity to have your dispute settled by a specialist who understands the practical issues underlying your claim. This flexibility is reflected, for example, in Thailand’s Arbitration Act, which defines a qualified arbitrator as one who is impartial, independent, and possesses the qualifications prescribed in the arbitration agreement.
In arbitration proceedings, you’re not only able to select a qualified arbitrator, but you also have the right to choose the place and language of the proceedings. For anyone doing business in a foreign country, being able to (i) select a convenient venue, (ii) follow proceedings without needing a translator, and (iii) submit documentation without translation are all major advantages of resolving disputes through arbitration.
Another procedural advantage relates to “Service of Process” — formally notifying your contract party that proceedings are beginning against them. Without this, there is no proceeding, no judgment, and no justice. Service of Process in court proceedings is time-consuming and can be expensive, particularly in Southeast Asia when a defendant is located outside the country in question, requiring a lengthy notification process. In arbitration, however, no government agency needs to be involved — an arbitration service provider, acting under your arbitration agreement, can serve your contract party directly and commence proceedings through to a worldwide-enforceable award, even if that party doesn’t acknowledge service or participate in the proceedings.
To submit a dispute to arbitration, both parties must agree to it. This typically requires something like what Thailand’s Arbitration Act requires: an agreement by the parties to submit to arbitration all or certain disputes — existing or future — arising from a defined legal relationship, whether contractual or not. This can take the form of an arbitration clause within a contract, or a separate agreement, but it must be in writing and signed by both parties.
One party cannot unilaterally submit a dispute to arbitration without the other’s agreement. If you fail to include an arbitration clause and a dispute later arises, the matter must go through local courts unless both parties subsequently agree to arbitrate. It’s therefore advisable to include a well-drafted arbitration clause in your agreement from the outset — once a dispute exists, getting both parties to agree on anything, including how to resolve it, can be very difficult, if not impossible.
Formal arbitration is often an outstanding alternative to domestic court proceedings, and for international parties — particularly in Southeast Asia — it’s almost always highly advisable to include it as your dispute resolution mechanism. That said, there are many factors to weigh both before and during the process of selecting and using arbitration to resolve a dispute. Consult a competent arbitration specialist before doing so.