Explain the process of Arbitration and assess the relevant merits and demerits of the arbitration process over

litigation. la solucin de una controversia por un tercero imparcial i.e. the settlement of a dispute by an impartial third party. This is known as arbitration. However, this understanding in modern times has not changed significantly but revisited to reflect its true and practical meaning in modern day society that is, as expressead by Professor Fiadjoe a process in which a neutral third party , or an odd numbered panel of neutral parties, renders a decision based on the merits of a case 1. Generally speaking, long before laws were established, or courts were organized, or judges formulated principles of law, men had resorted to arbitration for the resolving of discord, the adjustment of differences, and settlement of disputes.2 Therefore, the purpose of this paper is to take the course of discussing the history of Arbitration in Guyana, along with its importance as a dispute mechanism on the International plane, following an illustration of the Pros and Cons of Arbitration and finally an examination as to why Arbitration is much more effective and efficient than litigation. Arbitration as an ADR mechanism has been with us, here in the Caribbean for quite some time. Looking retrospectively at the development of this form of dispute settlement in a Guyanese context would show that in the rural communities e.g. the Victoria Village on the East Coast of Demerara, there existed what was known as the village committee, which acted as a tribunal that would listen to the matters with respect to the ownership of land, matters had to be brought before the Committee before recourse was made to the courts. Likewise, in the East Indian communities there was the Panchayats who operated in the open preferably sitting under a tree, either by themselves or together with the disputants. The result of these meetings with the Panchayat has shown to have saved many marriages, also influencing the restoration of family honors and family property preservation through their intervention. The importance of this dispute settlement method that was utilized by the village leaders and other influential people within the communal setting has graduated and became especially after the Industrial Revolution boom, one of the most favored method that was preferred in dispute settlements that were of a

1 2

Fiadjoe, Albert. Alternative Dispute Resolution: A Developing Perspective . (Great Britain: Routledge) 2004 pg 27 Frank D Emerson. History of Arbitration Practice and Law. 19 Cleveland State Law Review 155 (1970)

commercial nature. This method was later recognized as an Alternative Dispute Resolution mechanism. The evolution of arbitration has lead to Guyana implementing an Arbitration Act chapter 7:033. However, besides this fact one may note that in some situations, the scope of the rules for the arbitration process are set out by contract, in these circumstances the partners work together to design an arbitration process which is appropriate to their dispute. In some cases as expressed by Professor Fiadjoe posits the arbitrator, may limit the length of opening statements, or decide that there will be no disclosure or no oral hearing, in this way, the process can be tailored to meet the needs of the parties. Once the parties have set the parameters for the arbitration, the arbitrator assumes full control of the process. The importance of arbitration has been recognized by international tribunals and has been incorporated into many conventions and international agreements as a form of dispute settlement, take for instance the Arbitral Award of October 3rd, 1899 between Guyana v. Venezuela this regarded the issue of western Essequibo, to which Venezuela laid a claim.

Internationally arbitration awards are the most commonly used judicial means for the settlement of disputes. Arbitration awards have contributed significantly to the development of many areas of international law, and this has not diminished even now that we have the international court of Justice. The decisions of the US Mexican Claims Commission 1926, for example, did much to clarify the law of the state responsibility, and the arbitral award in the Islands of Palmas case (1928) is the locus classicus on acquisition of territory. Also, one should note that an important function of arbitration, and one which the ICJ cannot undertake, is to settle disputes between states and other bodies having international personality4. Typically, such arbitrations involve states and multinational corporations, although exceptionally individuals may be given the right to claim directly against a state. Two examples of arbitration heard under this framework are AAPL v. Sri Lanka and Southern Pacific v. Egypt which are both important in the law of state responsibility5.
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Arbitration is concerned with the rights and duties of the parties under

Laws of Guyana Dixon, Martin. International Law Fourth Edition (London: Blackstone Press) 2000 pg 268 5 Ibid

international law, and a settlement is achieved by the application of this law to the facts of the case. This is not to say that political or economic factors are irrelevant, but rather that they, of themselves, cannot affect the outcome6. As a general rule, arbitration awards are legally binding on the parties. Once a state has committed itself to arbitration it is under a legal obligation to give effect to the result in fact, despite the absence of enforcement machinery, the majority of arbitral awards are adhered to7. In arbitration proceedings, the parties may choose the arbitrators or judges, Unlike, disputes

submitted to the International Court, Parties to arbitration have direct control over both the composition of the panel and its procedure. This ensures that the panel enjoys the confidence of the parties and adds to the force of its final award. The prevalence of arbitral awards and procedures testifies to the success that this form of dispute settlement enjoys within the international community. On a practical level, the use of arbitration as a means of dispute settlement has contributed greatly to the peaceful resolution of disputes between states, as well as the development of international law. Its contribution has been felt more readily in specific areas such as state responsibility and maritime delimitation but the fact that the parties have a great control over the entire proceedings means that many states prefer it over litigation or ICJ settlement if a dispute cannot be settled by negotiation. Regionally, one can find that member states of Caribbean Community have the option of settling their disputes through arbitration this is exemplified in the Revised Treaty of Chaguaramas where it states that a member state party to a dispute may, with the consent of the other party, refer the matter to an arbitral tribunal constituted in accordance with the provisions of this chapter8 , it goes on to state that each of the member states parties to a dispute shall be entitled to appoint one arbitrator from the list of arbitrators the two arbitrators. The two arbitrators chosen by the parties shall be appointed within 15 days following the decision to refer the matter to arbitration. The two arbitrators from the list who shall within 15 days following the date of their appointments, appoint a third arbitrator from the list who shall be the chairman. As far as
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Ibid Ibid 269 8 Article 204 CARICOM Revised Treaty of Chaguramas Establishing the Caribbean Community Including the CARICOM Single Market and Economy 2002.

practicable, the arbitrators shall not be nationals of any of the parties to the dispute9.This does not only illustrate the flexibility that this method of alternative dispute settlement produces but showcases and reaffirms the understanding that arbitration is much more suitable for such a fast paced world and as such it caters for the exigencies of the region when it comes to states wanting to settle a dispute efficiently, amicably and fairly through their privilege of being able to chose the arbitrators that they want to settle their dispute hence removing any political or a grey cloud of bias for one state against the other.

However, some of the advantages for the process of Arbitration as expressed by Arthur Mazirow in his work The Advantages and Disadvantages of Arbitration as compared to Litigation10 are that: 1. It is consensual and rest on agreement, but agreements enter into arbitration will be enforced by the courts 2. Arbitration has, as its object, the rendering of a final and binding award, hence the arbitrator has the authority to make a binding decision 3. Arbitral procedures are often said to have the advantage over the courts for informality 4. Speedier resolution; however, there can be exceptions due to multiple parties, arbitrators, lawyers and litigation strategy. 5. Less costly; however, there can be exceptions due to multiple parties, lawyers, arbitrators and litigation strategy. 6. Exclusionary rules of evidence dont apply; everything can come into evidence so long as relevant and non-cumulative. 7. Not a public hearing; there is no public record of the proceedings. 8. Confidentiality is required of the arbitrator and by agreement the whole dispute and the resolution of it can be subject to confidentiality imposed on the parties, their experts and attorneys by so providing in the arbitration agreement. 9. From defense point of view, there is less exposure to punitive damages and run away juries;
9

10

Ibid 206 Presented to The Counselors of Real Estate April 13, 2008 Chicago, Ilinois

10. A party may record a lis pendens even if there if an arbitration pending by filing a law suit and then holding the case in abeyance until the arbitration is resolved. 11. The ability to get arbitrators who have arbitrator process expertise and specific subject matter expertise. 12. Limited discovery because it is controlled by what the parties have agreed upon and it is all controlled by the arbitrator. 13. Often, the arbitration process is less adversarial than litigation which helps to maintain business relationships between the parties. 14. The arbitration is more informal than litigation. With ever action there is a reaction and the reaction in this sense would be the cons or disadvantages of the process of Arbitration has these are as follows: 1. There is no right of appeal even if the arbitrator makes a mistake of fact or law. However, there are some limitations on that rule, the exact limitations are difficult to define, except in general terms, and are fact driven. 2. There is no right of discovery unless the arbitration agreement so provides or the parties stipulate to allow discovery or the arbitrator permits discovery. 3. The arbitration process may not be fast and it may not be inexpensive, particularly when there is a panel of arbitrators. 4. . Unknown bias and competency of the arbitrator unless the arbitration agreement set up the qualifications or the organization that administers the arbitration, has pre-qualified the arbitrator. 5. There is no jury and from the claimants point of view that may be a serious drawback. 6. An arbitrator may make an award based upon broad principles of justice and equity and not necessarily on rules of law or evidence. 7. An arbitration award cannot be the basis of a claim for malicious prosecution. 8. Except in certain circumstances, non-signatories of the arbitration agreement cannot be compelled to arbitrate. 9. The possibility of compromise or splitting of baby awards. Despite the varying disadvantages as illustrated, one can unequivocally see that with an analogy being made the opportunities and flexibility offered through the system of arbitration to one

seeking to use this approach places that individual in a much more comfortable and confident position than his litigant counterpart where efficiency, affordability and equity is in most cases seen as elusive or a thought that is far from reality. With Arbitration, parties have a free choice to select a tribunal that fits the nature of their disputes. So, for highly technical trade disputes, the parties may select an expert in the field as the arbitrator. Unlike in litigation where neither the jury or the judge may not have any knowledge nor experience with the subject matter of the dispute between the parties which results in the parties having to educate the judge as to the law and custom and practice which sometimes become a bit tedious and burdensome for both parties. With arbitration one can settle their dispute in private and they are also protected by the laws of privacy this could be crucially important in a dispute between rival companies in the competitive business field who would like to keep their know how, business strategy, etc, from the public for example the Coca Cola v. Pepsi Cola Case. In the Courts or with the process of litigation all information discussed in court is made public hence; all ingredients for popular and lucrative products would be exposed. Think about having to wake up and reading the daily news papers, only to see that in a dispute between two major fast-food outlets in your country having to publish their ingredients, primarily the outlet that you are a regular customer making your Fish sandwich with salt fish instead of cat fish that you thought they were using as stated on the menu. Ease of enforcement of the arbitral awards is a huge advantage. As is well known enforcing a domestic decision against a government is immensely problematic. That is not with arbitral awards because domestic laws and international conventions permit the registration and enforcement of these awards11. The reasonable probability that you will not be able to go to trial on the date that is set by the judge because the judges prior case is not over, or there is no courtroom available due to the priority of criminal matters, all of which results in the trial of the case being continued from time to time; Therefore unlike with arbitration where one can set up a meeting that is convenient to both parties at a place that is also convenient and free thus producing efficiency, under litigation that person may have to wait for days to weeks to months to years to decades to even centuries if one is given the opportunity to exaggerate the slow pace of the judicial system which also has a slippery slope effect of producing a back log in cases thus
11

Fiadjoe, pg 74

placing the judges under stress resulting who in most cases take home a meager salary which will only result in some eventually commencing bribery just because a party may want his matter to be heard and settled as soon as possible. This also leads to society holding a no confidence view of the judicial system. An award has no value unless it can be enforced. One of the principal concerns for those who arbitrate international commercial disputes, therefore, is how to secure the enforcement of an award in a foreign jurisdiction. The Convention on the Recognition and enforcement of foreign Tribunal awards was adopted by the United Nations conference on International commercial Arbitration on 10th June 1958 and came into force on 7th June 1959. Arbitration is also necessary for the development of a country economically. More and more one may find that many multinational and major Companies prefer to sign an agreement with a country once there is a clause stating in the agreement that dispute arising must be settled or presented to an independent or impartial tribunal this allows parties to avoid the uncertainties of foreign litigation, such as unfamiliarity with foreign law, questions of forum and jurisdiction, translation of documents, interpretation of evidence, fear of incompetent judges and unfamiliar rules of procedure and evidence, and claims of sovereign immunity are just some of the problems that may be encountered. So if the Litigation process is placed as a main means of disputing a settlement then we should say goodbye to economic growth and development for we would not be welcoming foreign investment and foreign expertise that is direly needed for such a rich and rapidly developing country like ours. As Richard Cobden expressed, At all events, arbitration is more rational, just, and humane than the resort to the sword and in this case the sword would be litigation.