WHAT İS THE ARBITRATION?
Arbitration is an increasingly popular and preferred dispute resolution method. If you are
curious about what arbitration is, how it works, in which areas it is used and what
advantages and disadvantages it has, keep reading this blog post. In this article, we will
cover the following topics:
- Definition and types of arbitration
- Stages and rules of the arbitration process
- Advantages and disadvantages of arbitration
- Recognition and enforcement of arbitral awards
DEFINITION AND TYPES OF ARBITRATION
Arbitration is a dispute resolution method in which disputes between parties are resolved by
arbitrators appointed by the parties themselves, rather than by the official judicial bodies of
the state. Arbitration is a voluntary procedure. In order to arbitrate, the parties must enter
into an arbitration agreement in advance or subsequently. An arbitration agreement is a
written agreement by the parties that the dispute will be resolved by arbitration.
Arbitration can be divided into different types according to its scope of application. The most
common are the following: - Commercial arbitration: This is a type of arbitration in which commercial disputes between
the parties are resolved through arbitration. Commercial arbitration can be national or
international. In international commercial arbitration, the parties may be from different
countries or the dispute may involve the law of different countries. - Sports arbitration: A type of arbitration in which sports-related disputes are resolved
through arbitration. Sports arbitration usually involves arbitration established or recognized
by sports federations or international sports organizations. - Administrative arbitration: A type of arbitration in which disputes arising in the field of public
law are resolved through arbitration. Disputes that may be subject to administrative
arbitration may cover areas such as public tenders, public services, tax, customs, energy.
STAGES AND RULES OF THE ARBITRATION PROCESS
The arbitration process generally consists of the following stages - Conclusion of the arbitration agreement: The parties must enter into a written agreement
that the dispute will be resolved by arbitration. The arbitration agreement may be part of the
contract or a separate document. In the arbitration agreement, the parties may specify the
subject matter, scope, number and selection of arbitrators, place, language, law and rules of
arbitration. - Selection of arbitrators: The parties may agree the number of arbitrators and the method of
selection between themselves or leave it to an arbitral institution. Arbitration is usually
conducted with one or three arbitrators. The arbitrators must be impartial, independent and
competent. - Filing the statement of claim and reply: The parties must submit their claims and defenses
on the merits of the dispute in writing to the arbitrators. The statement of claim and response
should include the parties’ claims, evidence and legal grounds. - Arbitration proceedings: Arbitrators try to resolve the dispute by hearing the parties,
collecting and evaluating evidence. Arbitration proceedings are shaped by the will of the
parties and the arbitration rules. Arbitration proceedings are usually faster, confidential,
flexible and specialized. - Making the arbitral award: The arbitrators resolve the dispute and issue an arbitration
award. The arbitration award must be in writing, be reasoned, contain the names of the
parties, the signatures of the arbitrators and the place of arbitration.
The rules to be applied in the arbitration process depend on the will of the parties. The parties
may apply their own rules or the rules of an arbitral institution. For example, the parties may
apply for arbitration by accepting the rules of the Istanbul Arbitration Center.
ADVANTAGES AND DISADVANTAGES OF ARBITRATION
Arbitration has many advantages. Some of them are as follows: - Speed: The arbitration process is faster than state proceedings. The arbitral award is usually
rendered within a few months. The arbitral award cannot be appealed. - Confidentiality: The arbitration process and award are confidential. The commercial or
personal secrets of the parties are protected. This, of course, makes arbitration a more secure
method. - Flexibility: The parties voluntarily decide how the arbitration process will work. The parties
can determine the number and selection of arbitrators, the place, language, law and rules of
arbitration. This also prevents objectionable situations. - Specialization: The parties may select arbitrators who are experts in the subject matter of
the dispute. Arbitrators are thought to be better able to understand and resolve the dispute. In
other words, an impartial professional opinion is needed.
Arbitration also has some disadvantages. Some of these are as follows: - Cost: Arbitration can be more costly than state proceedings. The parties have to cover the
arbitrators’ fees and the costs of the arbitral institution. This requires a certain budget. - Limitation: The arbitration process depends on the will of the parties. If there is no
arbitration agreement between the parties or if there is a dispute that cannot be subject to
arbitration, arbitration cannot take place. - Lack of control: The arbitral award is not subject to state judicial review. The arbitral award
cannot be challenged or annulled. This seems to be one of the biggest problems. - Recognition and enforcement problems: An arbitral award may face recognition and
enforcement problems in different countries. It cannot be checked whether the parties have
complied with the arbitration award.
RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS
An arbitration award is a final decision binding on the parties. The parties must comply with
the arbitration award. However, sometimes one of the parties may not comply with the
arbitration award, or it may be necessary to apply to the jurisdiction of another country to
enforce the arbitration award. In this case, the question of recognition and enforcement of
the arbitral award arises.
Recognition of an arbitral award means that the judiciary of another country accepts the
arbitral award as valid and binding. Enforcement of an arbitral award, on the other hand,
means the enforcement or compulsory execution of the arbitral award by the judiciary of
another country.
Recognition and enforcement of arbitral awards are governed by international law rules and
treaties. The most important treaty is the 1958 New York Convention or officially known
as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This
convention has been signed by 168 countries and sets out general rules for the recognition
and enforcement of arbitral awards.
Under the New York Convention, the judiciary of one country is obliged to recognize and
enforce an arbitral award rendered in another country. However, in certain exceptional
circumstances, a country’s judiciary has the right not to recognize or enforce an arbitral
award. These circumstances are as follows: - There is no valid arbitration agreement between the parties or one of the parties has not
consented to arbitration - A party failed to participate in the selection of arbitrators or the appointment of arbitrators
was irregular - If the arbitration process or award is unlawful
- If the arbitration award has not been finalized or has been annulled
- If the subject of arbitration is contrary to public order
In these circumstances, a country’s judiciary must give written reasons for not recognizing or
enforcing an arbitral award.
Recognition and enforcement of arbitral awards are important for the healthy functioning of
international trade and business relations. By recognizing and enforcing arbitral awards,
disputes between parties can be resolved more easily and efficiently.
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