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Understanding commercial arbitration

arbitration insights:WITH JACOB MUTEVEDZI

In his seminal work, Rhetoric, Aristotle makes the following apposite observation: “it is equitable to be patient under wrong (not to retaliate); to be willing that a difference shall be settled by discussion rather than by force; to agree to arbitration rather than to go to court, for the umpire in an arbitration looks to equity, whereas the juryman sees only the law. Indeed, arbitration was devised to the end that equity might have full sway.”

In this statement Aristotle captures the essence of arbitration with commendable exactitude. Far from what is commonly perceived, arbitration is by no means a recent way of settling disputes, its availability as a preferred alternative to litigation dates back to ancient Greece. As far back as 1602, Shakespeare in Troilus and Cressida used the word “arbitrator”, when he remarked: “And that old common arbitrator, Time, Will one day end it.”

In Zimbabwe, voluntary commercial arbitration is regulated by the Arbitration Act [Chapter 7:15]. Arbitration is also employed in the workplace to resolve disputes in terms of the provisions of the Labour Act [Chapter 28:01]. The present discussion is confined to commercial arbitration outside the realm of labour law. The Arbitration Act is wholly derived from the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on the 21st June 1985. It has come to be known as “the UNICITRAL Model law” or simply “the Model Law”. Article 2 (a) of the Model Law does not define “arbitration” in a fashion that is readily comprehensible to the layman. It simply defines arbitration as “any arbitration whether or not administered by a permanent arbitral institution”. This definition encapsulates arbitration of a purely ad hoc nature and that which is institutionalised.

It is clear, therefore, that even after reference to Article 2 (a) of the Model Law one remains bereft of a clear appreciation of what arbitration constitutes.

It admits of no doubt that the meaning of arbitration has been taken for granted. The necessity of a definition has, for the most part, played second fiddle to its function. Nonetheless, various attempts at a definition have been made. In the old English case of Collins vs. Collins 1858 28 LJ Ch 184 the court hazarded the following definition, “An arbitration is a reference to the decision of one or more persons, either with or without an umpire, of some matter or matters in difference between the parties”.

Halsbury’s Laws of England, 5th Edition (2008), Book 2, “Arbitration”, at page 1201 defines arbitration as follows: “a process used by agreement of the parties to resolve disputes. In arbitration, disputes are resolved, with binding effect, by a person or persons acting in a judicial manner in private, rather than by a national court of law that would have jurisdiction but for the agreement of the parties to exclude it. The decision of the arbitral tribunal is usually called an award.”

In yet another English case Sir John Donaldson in Northern Regional Health Authority V. Derek Crouch defined the concept in the following terms: “Arbitration is usually no more and no less than litigation in the private sector. The arbitrator is called upon to find the facts, apply the law and grant relief to one or other or both of the parties”.

The World Intellectual Property Organisation (WIPO) has defined arbitration as: “a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court”.

In the Canadian case of Warren v Lawyers’ Public Protection Association 56 Alta. LR (3d) 52 (1997) arbitration was defined as: “a process of dispute resolution adopted consensually by the parties in preference to what is sometimes perceived as the slower more expensive civil litigation process available at law.”

From this vast array of definitions, what arbitration constitutes can be explained to a lay person in very simple terms. In arbitration your claim is heard privately by one or more persons called “arbitrators”. These arbitrators are mutually appointed by agreement between you and the person against whom you are claiming. In the absence of agreement to choose arbitrators, the arbitrators will be appointed by someone whom you have agreed upon to choose. In the event that all these other options fail, the arbitrators will be appointed by the court.

The procedure employed in determining your claim can, if you choose, be almost as formal as that followed in litigation. In actual practice arbitral procedure is often relaxed and informal. The arbitrator is likely to be someone very experienced in dealing with the kind of dispute at hand. Your claim and the other party’s answer to it will be submitted to the arbitrator at a hearing unless, as frequently occurs, you agree that it shall be decided on the documents without a hearing. The hearing, if there is one, will be private. The cost of the arbitration depends on the nature of the procedure adopted. If you want a full scale hearing, similar to that employed in formal court proceedings it may cost even more than a court hearing. Otherwise, arbitration is in most cases much cheaper and quicker than going to court. The arbitrators will make their decision, which is called “an award”. An arbitral award can be enforced as if it were an order of the court.

In the final analysis, arbitration is an alternative to court litigation which facilitates the private resolution of disputes while ensuring that the parties involved maintain their autonomy from court intervention except in circumstances where the Model Law permits such intervention. The parties are at liberty to determine the procedure employed to resolve their dispute. An arbitral award confers finality and is binding on the parties.

l Jacob Mutevedzi is a commercial lawyer and partner at Clairwood Chambers Attorneys and writes in his personal capacity. He can be contacted @ jmutevedzi@gmail.com

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