Arbitration is triggered by an arbitration clause in a contract. The arbitration clause will typically provide that if a dispute arises in respect of the contract or matters that come within the ambit of the contract, the matter must be referred to arbitration.
Either party to the contract is at liberty to issue a notice of dispute and the notice of dispute need only make mention of the fact that there is a dispute or difference, although many lawyers like to set forth the basic framework for the dispute.
A disputant will also after having had regard to the arbitration clause under the contract refer the matter to the body that is contractually identified as the body that nominated the arbitrator. The ICC,
Some arbitration clauses stipulate that the parties can agree upon an arbitrator but in the absence of agreement the parties are required to refer the matter to the nominating body. The nominating body may be the ICC, SCC or another arbitral institution. The body that is nominated in the contract is the body that chooses the arbitrator.
The arbitrator must be a qualified arbitrator, or a group of three arbitrators although this increases costs significantly.
Upon accepting an engagement, an arbitrator will require funds to be placed in trust prior to the crystallisation of his or her appointment. The monies are normally placed in an account held by the nominating body. Once the monies are placed in the account the arbitrator will write to the parties and order them to come to a directions hearing, where the procedure to be followed in the case is discussed.
The norm is that lawyers are engaged as advocates for the disputants and, at the initial directions hearing, a synopsis and description of the issues that define the conflict will be presented.
The process is then very much reminiscent of the courts. The arbitrator in cohorts with the advocates will typically make the following types of orders.
- A statement of claim will be filed that articulates the particulars of the dispute.
- A statement of defence will be filed and in circumstances where there is a counterclaim the counterclaim will be filed with the statement of defence.
- The plaintiff will be ordered to file a reply to the statement of defence and counterclaim.
- The second memorial filed by the defendant is typically called the statement of rejoinder.
- An order for discovery may be forthcoming, and both parties will be ordered to draft and file an affidavit of documents comprising all documentation relating to the contract of the dispute.
- There may be an order for discovery whereby both parties will be afforded the opportunity to inspect the other party’s documents.
- Typically, the parties will be desirous of retaining expert witness to provide specialist opinion on matters that make up the ingredients of the dispute. Expert witness statements then have to be prepared, served and filed.
- There may be an order that the matter is sequested out to mediation, although this is optional. Mediation is less expensive to resolve a dispute than arbitration, but it only works when both parties have a minimum of good faith and are interested in settling the dispute.
- There will be further orders providing that the parties will be required to attend further compliance directions hearings to ensure that the time frames for submitting and filing interlocutory pleadings are indeed filed by the due date.
- Once matters have been progressed to the extent that relevant pleadings have been filed and served, discovery has been completed and expert witness statements filed the matter will be set down for hearing.
- Throughout the process the arbitrator will require the parties to place in trust monies in advance. At the ICC, these amount are called an advance on costs.
All major arbitration institutions have a similar procedural framework, with slight, but at times important, variations.