Using the ad hoc arbitration procedure enables parties get to pick arbitrators who aren’t affiliated with any specific arbitration body. Another advantage lies in the fact that arbitrators can be guided by their own rules while carrying out the ad hoc arbitration procedure. Resorting to ad hoc arbitration for resolving disputes only requires coming up with a properly formulated clause, such as: “All disputes that are likely to arise between the counterparties shall be resolved by resorting to arbitration. The counterparties can choose how many arbitrators will be participating in proceedings and what law will be applicable.”
Also, the counterparties are free to select a venue for arbitration, which under certain legal scenarios might affect their choice of applicable law for settling a dispute through ad hoc arbitration.
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The pros of settling disputes through ad hoc arbitration are:
- Low cost
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The cons of settling disputes through ad hoc arbitration include:
- The counterparties may not be able to reach a deal on applicable rules of arbitration & the arbitrator’s candidacy. This may cause the cost of arbitration to increase dramatically & lead to delays & the need to file an appeal with respective courts. The counterparties may reduce the risk of such a misunderstanding by concluding an agreement on the application of procedural rules by one of the properly authorized arbitration bodies.
- Arbitrators’ fees. None of the counterparties wants to make an arbitrator upset, which is why an auction situation may arise in which each side will be seeking to provide an arbitrator with a higher remuneration rate.
Those seeking to use ad hoc arbitration for settling a dispute should be aware that this procedure is going to be less costly & meet the counterparties’ requirements only if:
- There’s a fairly high level of interaction between the counterparties
- The counterparties have previous experience of resorting to ad hoc arbitration
- Arbitrators are competent & professional
In conclusion, absence of administrative costs, coupled with the other pluses described above, make settling disputes through the ad hoc arbitration procedure a popular arbitration form. Nevertheless, there are those who are still inclined to choose more traditional forms of arbitration, such as an institutional one. To justify their choice, they cite the the plethora of pre-defined rules, which make the whole process more predictable, even though arbitration costs may be a lot higher.
Considering resolving a dispute through ad hoc arbitration? Need legal help with choosing a proper arbitrator? Need legal advice on how to formulate a proper ad hoc arbitration clause? IQ Decision UK is the answer.