© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - Commercial Disputes: The Pros and Cons of Arbitration
Posted 17th July 2024

Commercial Disputes: The Pros and Cons of Arbitration

Litigation – that is, formally dealing with a dispute through the parties’ domestic courts – has long been the go-to solution when commercial disputes arise, but this form of dispute resolution has been regarded as lengthy, costly, and does little to preserve any commercial goodwill between the parties involved.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

Commercial Disputes: The Pros and Cons of Arbitration
Court

By Yulia Barnes, Founder and Managing Partner of Barnes Law.

Litigation – that is, formally dealing with a dispute through the parties’ domestic courts – has long been the go-to solution when commercial disputes arise, but this form of dispute resolution has been regarded as lengthy, costly, and does little to preserve any commercial goodwill between the parties involved.

Conversely, Arbitration has become an internationally welcome form of commercial dispute resolution.

So, what does arbitration entail, and is it the right choice for you should you find yourself at the centre of an ongoing commercial dispute?

What is arbitration?

There are times where formal litigation is unavoidable. However, both commercially and within the judiciary, there is a growing interest in, and encouragement of, alternative dispute resolution [ADR] – that is, procedures for resolving disputes outside of court.

Arbitration is one such form of ADR.   The powers of an arbitral center or court stems from the New York Convention 1958, under which contracting states agree that their domestic courts shall recognise and enforce foreign arbitral awards. Examples of the most prominent arbitration centers and courts include the London Court of International Arbitration (LCIA), the Swiss Arbitration Centre, the Hong Kong International Arbitration Centre (HKIC), and the International Chamber of Commerce (ICC).

A contractual clause may provide that a particular arbitration center will have jurisdiction to consider a potential dispute. However, a dispute may be referred to arbitration by way of separate arbitration agreement.  

The parties involved in the dispute will then appoint an arbitrator – an impartial third party with expertise in the area in dispute. This might be a single person, a sole-arbitrator, or an arbitral tribunal. An arbitration clause or agreement may also determine how the tribunal will be formed. As well as possessing specialist insight into the relevant areas involved in the dispute, the tribunal can include the most well-respected and experienced lawyers within that jurisdiction and can often include lawyers qualified in both civil and common law, which is particularly useful in cross-border disputes.  

 The arbitration will be governed by the procedural rules published by the various arbitration centres, which are drafted to provide the parties with flexibility and choice as to procedure. Any hearings can take place in a venue within the ‘place’ (location) of the arbitration, whilst the agreed ‘seat’ of the arbitration (the applicable law) will determine how the arbitration is supervised and conducted. Despite not taking place in court, it’s important to note that the decision made by an arbitration tribunal is legally binding, meaning parties are obligated to follow it. As above, parties may also turn to the domestic courts to seek enforcement of an arbitral award.

Benefits of arbitration

Perhaps the greatest asset of arbitration as a method for solving commercial disputes is the parties’ (and the tribunal’s) ability to expedite the resolution of the claim, compared with the domestic courts. Court processes are often slow, so parties wishing for a speedy resolution to their dispute may opt for arbitration on this advantage alone. In most cases, arbitrators can deal with a dispute within the proposed timescale of the parties involved.

Related to this is increased flexibility of the arbitration process, where the process can be better adapted to the availability of the parties, compared with a court process which is far more fixed and rigid.

Arbitration can also be a more cost-effective option, as the quicker resolution time reduces the time spent attending to the dispute that can be focused on the parties’ respective commercial interests.

Commercial disputes can often be highly technical, and as such, the ability to appoint an arbitrator who is an expert in the subject matter in question is yet another huge advantage over litigation, as is the ability for parties to choose their arbitrators. In court proceedings, no such choice over the presiding judge exists.

Finally, court proceedings are open to the public. For sensitive commercial disputes where parties wish for their interests to remain private, the arbitration process offers this confidentiality.

Drawbacks of arbitration

Arbitration offers some unique benefits as a method of dispute resolution when compared with litigation, but there are also some potential disadvantages associated with going down the arbitration route.

Though often a cost-effective option when compared to litigation, arbitration can still pose a significant cost, particularly in cases where the dispute is complex. Likewise, in these complicated instances, litigation may still be a speedier resolution, such as instances where finding mutually acceptable hearing dates is a challenge.

Like litigation, arbitration is still fundamentally an adversarial process, and as such, parties may be unhappy with the decision imposed upon them. Due to this adversarial process, those in the middle of a commercial dispute wishing to preserve as much goodwill between parties as possible, may still prefer to investigate other methods of ADR, such as mediation.

The decision of the arbitrator is legally binding, but unlike in court proceedings, this decision can be incredibly difficult to appeal, offering little in the way of recourse for parties that find themselves at a disadvantage at the end of the arbitration process. Similarly, though this decision is legally binding, it is not legally enforceable, and in some instances, enforcing the decision of the arbitrator may still require a judicial remedy.

Is arbitration right for your business?

Deciding whether litigation, arbitration or a different form of dispute resolution is the best option for you requires weighing up these various pros and cons as related to your specific commercial dispute.

One of the key considerations here should be the exact nature and complexity of the dispute in question, as well as its technical nature. Naturally, your budget and time constraints will also play a role in determining the best method to pursue, but more broadly, it’s also important to consider how significant the impact this dispute might have on your business is. Privacy concerns may also play a central role here, so it’s crucial to consider whether the confidentiality of the arbitration process is better suited to your needs than court proceedings that are a matter of public record.

Finally, you may want to consider how important maintaining a cordial and positive relationship with the other party involved in the dispute is. In situations where an opposing party is hostile, uncooperative or obstructive to the arbitration process, litigation may be your only recourse.

Final thoughts

Choosing the right method for solving business disputes as they arise is vital to ensuring your commercial interests are protected. Dispute resolution is a complex area to navigate, so it is important not only to understand the advantages and disadvantages of alternatives to litigation such as arbitration, but to also have access to the right legal advice to ensure your best interests are served throughout the dispute resolution process.

Categories: Legal, News


You Might Also Like
Read Full PostRead - Eye Icon
Four Key Elements can Deliver a Successful Data Mesh Strategy, says STX Next
News
11/06/2024Four Key Elements can Deliver a Successful Data Mesh Strategy, says STX Next

Domain ownership, information as an asset, data catalogues and context-aware governance should all inform how architecture is modelled and used

Read Full PostRead - Eye Icon
The Rise of Entry Screening Solutions To Enhance Safety And Security
News
03/07/2023The Rise of Entry Screening Solutions To Enhance Safety And Security

In an increasingly complex world where safety and security are paramount concerns, entry screening solutions have emerged as crucial tools to protect public spaces. These innovative solutions provide a comprehensive approach to identifying potential threats an

Read Full PostRead - Eye Icon
Ways to Save Legal Expenses Using Outside Counsel
Legal
15/06/2022Ways to Save Legal Expenses Using Outside Counsel

When you have outside counsel it means you are taking services for which you pay only when you use them. When you engage outside counsel, your goal is likely to be how to manage legal expense control. If you have in-house counsel, you will pay whether you use

Read Full PostRead - Eye Icon
Balfour Beatty Completes Acquisition of £352 Million Offshore Transmission Project in Wales
Finance
20/02/2015Balfour Beatty Completes Acquisition of £352 Million Offshore Transmission Project in Wales

Balfour Beatty announces that it has reached financial close and completed the acquisition of the £352 million Gwynt y Môr offshore transmission project (OFTO) in the UK.

Read Full PostRead - Eye Icon
How to Securely Invest in Businesses That Do Well During a Pandemic
Finance
21/07/2021How to Securely Invest in Businesses That Do Well During a Pandemic

The Covid-19 pandemic has caused immeasurable harm to businesses. However, there are some that are thriving. Find out where best to invest now.

Read Full PostRead - Eye Icon
How Multilingual Support Enhances Business Continuity and Crisis Management
News
20/05/2024How Multilingual Support Enhances Business Continuity and Crisis Management

Even in everyday circumstances, effective communication is a base level requirement for businesses operating worldwide. So when crises occur, it’s doubly important to maintain this minimum standard. This is where multilingual enters the picture, forming

Read Full PostRead - Eye Icon
BTCGaw is Now Buying Bitcoins With 11% More Than Blockchain Official Rate
Finance
09/04/2015BTCGaw is Now Buying Bitcoins With 11% More Than Blockchain Official Rate

BTCGaw INC. has announced yesterday its latest offer for Bitcoin sellers: a conversion rate with an 11% increase compared to Blockchain's official rate.

Read Full PostRead - Eye Icon
Westinghouse Increases Commitment to Nuclear Industry with Acquisition
M&A
05/10/2016Westinghouse Increases Commitment to Nuclear Industry with Acquisition

Westinghouse Electric Company, LLC has signed a definitive agreement with AZZ Inc. to acquire Nuclear Logistics Inc. (NLI), the largest third-party supplier of safety-related equipment solutions to the nuclear industry. The acquisition supports Westinghouse’

Read Full PostRead - Eye Icon
Producing Accurate Insights for Data Driven Organisations
Innovation
03/05/2019Producing Accurate Insights for Data Driven Organisations

DigitalMR is a technology company which uses Artificial Intelligence for market research and customer insights. Recently the firm found success in AI’s Global Excellence Awards 2019. On the back of this win, we profiled the firm and caught up with Sales & Ma



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have a number of unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow