Question 05 - Discuss Arbitration As An Alternative Dispute Resolution

Method.
Disputes arises more frequently in the world of business, regardless of its scale, structure,
turnover etc and a dispute can be described as different opinions produced by different
parties with regards to interest, rights and obligations of an contract, resulted due to the
individual expectations. Such expectations may tend to lead the dispute into a controversy
issue take the matter out of propulsions.
In response to the above, traditionally parties tend to enter into legalization to resolve
disputes which have arisen in their contract, which had resulted such parties excessive
amount of money and considerable amount of time wastage and had made the process
more complicated to execute.
However, since resent past parties of a contract in the event of a dispute tends to enter into
Alternative Dispute Resolution, which have made ease on the settlement process as the
disputes are narrowed down to a greater extent. Arbitration Act no.11 of 1995 had introduced
Alternate Dispute Resolution to Sri Lanka, and was further supplemented by the Mediation
Centre of Sri Lanka act No. 44 of 200 to encourage the settlement of commercial disputes
through. Generally the Alternative Dispute Resolution shall consist of the following elements;
Arbitration
Conciliation
Mediation
The main purpose of arbitration is to involve a third party in resolving a dispute arisen
between two parties by a formal arbitrator award. Arbitration shall be performed by an
independent third party, who shall consist of even number of Arbitrators appointed by the
dispute parties and the appointed arbitrators are led by a Chairman who shall be appointed
by a joint agreement of the disputed parties. Douglas A (2001) defines an arbitrator as
follows in his book Arbitration Practice in Construction Contracts
An arbitrator is a private extraordinary judge between party and party, chosen by their
mutual consent to determine controversies between them
However, the requirement of an arbitration shall come into force only when the Arbitration
clause is being included in the contract of the parties, stating that the disputes needs to be
referred to an Arbitration for the first instance. But in the event of a dispute and if the
concerned parties feels that the same requires to be referred to an arbitration, the action

needs to be taken immediately without any unjustifiable delay. However, in circumstances

when disputed parties are not in an agreement between each other with regards to the
appointment or the procedure to be carried out, the high court exercises the power granted
by the law to appoint or decide the procedure in such circumstances.
The hearing of arbitration will be strictly limited to the parties concerned, where arbitrators
shall permit all parties to express their concerns with regards to their subject dispute. In
order to further supplement and justify the arguments the parties are bound to produce
sufficient evidence in terms of material of documentation before the arbitrator panel. In the
event sufficient justifications are not being presented before the panel by the parties, the
Arbitration panel deserves the right to drop down the arguments being presented.
The arbitrators shall ensure to exercise their processes in an equitable manner at all times
with respect to all parties at dispute, without deviating from their role stated in the arbitration
agreement. Upon close considerations on the facts and justifiable information provided by
the parties, the arbitrators shall announce their final decision by an Arbitration award in
writing along with the basis of their judgment, signed off by all the arbitrators who had
witnessed the dispute. However, the signatures of the majority of all the members are
considered as sufficient, provided reasons for omitted signatures.
In accordance to the requirement stated by the parties on the Arbitration agreement the
outcome on an award could be an order for payment, a declaration on the determination,
order to a parity to do or refrain doing something, or either an order specifically made
mandatory to perform in an contract etc. and Ray T (2005), defines that in accordance to the
Arbitration act of 1996 of England, the award of an arbitrator could be declared under the
following;
Substantive awards (Ex: A monetary award, a declaratory award, a performance
award,. an injunctive award etc;)
Supportive awards (Awards which deals with remedies)
Procedural awards (an award dismissing the claim, an award on abandonment
Institutional awards (an award under rules or under other statutes or an award under
consumer schemes
Ancillary awards (power to order relief on a provisional basis or power to order the
provision of security for costs)
The parties cannot take up the arbitration award before a court unless and otherwise there
shall be a valid legal background to do so, as the arbitration award is final and conclusive

award. Unless and otherwise a valid reason shall exist, the court shall not exercise the
jurisdiction over the award of the arbitration. On the other hand, in the event a clause being
included in the arbitration agreement to exclude the rights of appealing, under such
circumstances the concern parties shall not deserve the privilege of appealing whatsoever.
But, in the event the concerned parties agree to settle the dispute mutually without further
proceedings, such agreement between the parties shall constitute towards an enforceable
award. Further, if the parties feel that that the arbitration award had violated the laid rules of
UNCITAL, the same could be a considered as a valid legal reason to seek the jurisdiction of
a court. Douglas, A (2001), in accordance to the English law, describes the Power of
arbitrator to rule on own jurisdiction as follows.
Unless the parties agree otherwise, the arbitrator is empowered to rule on his own
substantive jurisdiction, with the proviso that his ruling may be challenged by any available
appeal process in the Act
Conciliation and Mediations are the other alternative dispute resolution methods being used
in commercial disputes, Where conciliators act as a neutral third party, who shall assist and
guide the parties towards a positive relationship to settle the dispute by an across the table
discussions, but not permitted to create a legal binding settlement between the parties. In
terms of Mediation, the mediator act as a neutral third party, on the assumption that the
parties at dispute could resolve their disagreement proving the right coordination and fair
terms in the opinion of the Mediator is correct, but had made no authority in making any
binding decisions.
In addition to the above discussions, the main advantages of an Alternate Dispute
Resolution could be listed as follows, which shall be benefitted to all parties who are involved
in disputes. Since resent past the most of the contracts are included with the arbitration
clauses and an extract of such clauses are attached under appendix 1 of this assignment.
An effective method which saves time.
The cost of entering in Alternate Dispute Resolution is much more less than the cost
of entering into litigation.
Effective method is preserving relationship between parties who are at dispute.
Offers greater privacy and transparency throughout the whole process