Arbitration is a popular form of alternative dispute resolution (ADR) that allows parties to settle disputes outside the courtroom. It is often preferred because it is faster, more private, and generally less formal than traditional litigation. However, like any legal process, arbitration can come with its own set of challenges. Parties involved in arbitration need to avoid common mistakes that can lead to unfavorable outcomes, delays, or unnecessary costs. Below, we explore some of the most frequent errors in arbitration and how to avoid them.

1. Failing to Choose the Right Arbitrator

One of the first and most important decisions in arbitration is selecting the arbitrator. The choice of arbitrator can greatly impact the outcome of the dispute.

Common Mistakes:

  • Choosing an Arbitrator with Limited Expertise: An arbitrator needs to be knowledgeable in the relevant field of dispute (e.g., construction, corporate law). Failing to choose someone with the right expertise can lead to poor decisions.
  • Lack of Neutrality: Picking an arbitrator who has conflicts of interest or who is biased can undermine the entire process.

How to Avoid It:

  • Carefully review the arbitrator’s qualifications, experience, and track record in handling similar disputes.
  • Ensure that the arbitrator is neutral and has no prior relationship with either party.
  • If possible, seek recommendations from trusted professionals or organizations specializing in arbitration.

2. Not Defining the Scope of the Dispute Clearly

Another common mistake in arbitration is not defining the issues clearly at the outset. This can lead to misunderstandings, unnecessary arguments, or wasted time and money.

Common Mistakes:

  • Vague Dispute Descriptions: A lack of clear definitions of the issues at stake can cause confusion and delay.
  • Excluding Key Issues: Sometimes, parties fail to outline all the important aspects of the dispute from the beginning, only to realize later that these issues are central to the case.

How to Avoid It:

  • Make sure that all relevant issues are clearly defined in the initial stages.
  • Discuss with your legal team what points need to be included and ensure both parties are in agreement.
  • Consider appointing an expert to help define complex issues, especially in technical areas.

3. Ignoring the Arbitration Agreement

Before entering into arbitration, it’s crucial to carefully review and understand the arbitration agreement. This is a document that outlines the rules, procedures, and expectations of the arbitration process.

Common Mistakes:

  • Not Understanding the Arbitration Clause: Parties sometimes overlook specific provisions within the arbitration agreement, such as the location of the arbitration, the language to be used, or the governing law.
  • Not Agreeing on the Rules: The arbitration agreement may specify certain rules (such as ICC, LCIA, or UNCITRAL rules) that must be followed. Not adhering to these can lead to complications later on.

How to Avoid It:

  • Ensure both parties fully understand and agree on the terms of the arbitration agreement before proceeding.
  • If necessary, consult an expert to help interpret complex clauses.
  • Double-check the specifics of the agreement, including the forum, language, and procedural rules.

4. Not Managing the Timeline Effectively

Arbitration is generally quicker than litigation, but delays can still occur. Poor time management is a common mistake that can result in an extended dispute resolution process.

Common Mistakes:

  • Failure to Meet Deadlines: Missing deadlines for submitting evidence or responding to requests can hurt your case.
  • Delaying Decisions: Delaying key decisions or responses can prolong the process unnecessarily.

How to Avoid It:

  • Create a clear, realistic timeline for all steps of the arbitration process.
  • Monitor deadlines closely and make sure all required documentation is submitted on time.
  • Be proactive in addressing any delays or obstacles that might arise.

5. Inadequate Preparation

Effective arbitration requires thorough preparation. Failing to prepare properly can lead to missed opportunities to present your case or defend against claims.

Common Mistakes:

  • Not Gathering Sufficient Evidence: Having a strong evidential foundation is crucial. Many parties fail to gather enough documentation or fail to prepare witnesses adequately.
  • Underestimating Legal Arguments: Simply assuming that the arbitration will go smoothly without preparing detailed legal arguments can backfire.

How to Avoid It:

  • Invest sufficient time in gathering and organizing evidence before arbitration begins.
  • Prepare and rehearse legal arguments and anticipate possible counterarguments.
  • If necessary, hire expert witnesses to support your case.

6. Overlooking Settlement Opportunities

Arbitration is an excellent platform for negotiating a resolution to disputes, but many parties ignore opportunities for settlement before, during, or even after the arbitration process begins.

Common Mistakes:

  • Failing to Settle Early: Many parties get too entrenched in their positions and fail to settle early, causing the arbitration to become more costly and contentious.
  • Not Considering Mediation: Arbitration is part of the broader category of dispute resolution, but mediation, a more informal and collaborative process, might be more appropriate in some cases.

How to Avoid It:

  • Always consider the possibility of settlement before going into arbitration.
  • Explore mediation or other forms of ADR as alternatives, or even in conjunction with arbitration, to achieve a quicker resolution.
  • Be open to negotiation throughout the arbitration process.

7. Ignoring the Post-Arbitration Process

Once the arbitration award is made, some parties fail to properly address the next steps, which can lead to enforcement issues or post-arbitration disputes.

Common Mistakes:

  • Ignoring Enforcement Procedures: After the arbitration award, ensuring its enforcement in different jurisdictions is essential, especially when the parties are based in different countries.
  • Not Preparing for Appeals: Some arbitrations allow limited grounds for appeal. Ignoring the rules for challenging an award can lead to costly mistakes.

How to Avoid It:

  • Familiarize yourself with the enforcement procedures in the relevant jurisdiction.
  • If necessary, consult legal experts to ensure smooth post-arbitration steps, including enforcement or appeals.

Partner with Anja Bolz, an Expert in Arbitration

Arbitration is a useful tool in resolving disputes, but it has its pitfalls. By not committing the usual errors of selecting the wrong arbitrator, not clearly defining the dispute, or ignoring proper preparation, parties can better ensure a successful and effective arbitration process.

If you need professional arbitration services, Bolz Arbitration is your best bet. With specialization in corporate, commercial, joint venture, shareholder, partnership, family business, construction, and real estate disputes, Bolz Arbitration applies a commercial and pragmatic approach to achieve a fair and effective solution for all parties concerned.