Arbitration is either "ad hoc" or "administered." The parties must decide which method is preferred. Each has its own merits.
In an ad hoc proceeding, the parties privately manage their arbitration. This ensures complete privacy and control. In addition, the parties and arbitrators either develop their own rules or use recognized standards to govern their ad hoc proceedings.
A prominent standard, for example, is the widely accepted unanimously approved 1985 United Nations Commission on International Trade Law Model Law on International Commercial Arbitration ("UNCITRAL Model Law")18 Member countries have subsequently adopted enabling legislation. So have some U.S. states, like Illinois.19
Today, as a result, the UNICTRAL Model Law embodies a supranational arbitral standard, recognized and applied around the world. Legislation based on this Model Law has been enacted in dozens of countries and several progressive state legislatures in the United States.20 Consequently, the UNCITRAL Model Law is often used by parties to govern their ad hoc arbitration proceedings.
In contrast to ad hoc proceedings run by the parties, an administered or "institutional" arbitration involves the services of an arbitral agency. In the United States, for example, the largest such administrative agency is the American Arbitration Association ("AAA"). In response to increasing global demand for effective commercial dispute resolution and arbitrations, the AAA established its International Centre for Dispute Resolution ("ICDR").21
The ICDR, with offices in New York, Ireland and Mexico, often applies its own arbitral rules and is charged with the exclusive administration of all the AAA's international matters 22 For a fee, the AAA administers the entire case from initiation to enforcement of an arbitral award.
Other organizations also offer arbitration services. The International Institute for Conflict Prevention & Resolution ("CPR"), for example, provides limited arbitral services and encourages parties to apply its rules. In particular, the CPR adopted the 2000 Rules for Non Administered Arbitration of International Disputes.23 The CPR encourages the parties to apply its arbitral rules, yet it does not administer arbitrations. Instead, the parties use CPR services to assist in selecting a panel of arbitrators. The parties then manage their own proceeding.
There are many institutional agencies around the world that administer arbitrations or provide rules that can be incorporated into arbitration agreements. Some of these agencies have industry specific expertise and are located in areas active in global commerce. Among them are:
Arbitration has its disadvantages. First, discovery may be too limited. Arbitrators evaluate the relevance and materiality of the evidence offered. However, the arbitration agreement or the parties' choice of applicable rules may restrict the scope of discovery from the outset, so that marshalling appropriate proof may be difficult or impossible.
Second, as discussed above, absent fraud, corruption or excess of authority, the appellate remedies available to vacate an arbitral award are narrow. This limitation expedites the dispute process, but may deprive the parties of adequate review.
Third, hearsay evidence may be offered in an arbitral proceeding. This could prove persuasive, and the arbitrator's use of the evidence is not subject to strict evidentiary rules. Even where the arbitrator relies on only marginally trustworthy evidence, the subsequent arbitral award is likely to be upheld.
As noted, an arbitrator may not manifestly disregard the law (i.e., be conscious of the law and deliberately ignore it). However, an arbitral award will not be vacated where an arbitrator"manifestly disregarded" the evidence.24 This is unsettling, especially when no substantial appellate review is available.
Finally, arbitration does not impose compulsory or permissive rules of joinder. Thus, a necessary party may not be added to enable a complete resolution of the dispute. The decided issues are only binding as to the arbitrating parties, though they may have issue preclusion consequences beyond the arbitration.
18 See, United
Nations Commission on International Trade Law ("UNCITRAL"),
http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf
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19 Illinois International Commercial
Arbitration Act, 710 ILCS 20/1-1 et seq. back
20 See. Status, UNICTRAL
Model Law on International Commercial Arbitration, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html
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21 http://www.adr.org/sp.asp?id=28819
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22 Id. back
23 See, http://www.cpradr.org/CPRStore/tabid/67/ProductID/19/Default.aspx
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24 See, Wallace v. Buttar,
378 F.3d 182, 193 (2d Cir. 2004). back