Arbitration is a consensual dispute resolution process where the parties agree to submit their disputes to be resolved by an arbitral tribunal, whose award will be final and binding.
Arbitration proceedings are conducted in private, rather than in court, and are heard by an arbitrator rather than a judge. Arbitration procedures are generally less formal, and there are no restrictions on who may represent parties in an arbitration.
Arbitral proceedings are conducted in private and may be confidential by agreement of the parties. Arbitration is a flexible process which can be quicker and cheaper than litigation depending on the procedures agreed to by the parties. Arbitration also provides a greater level of finality than litigation, with limited rights of appeal available. On an international level, arbitration has the advantage of being enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (referred to as the New York Convention) in countries that are parties to the convention (of which there are currently over 145).
Because of its procedural flexibility, it is generally possible to conduct arbitration proceedings more quickly than litigation. Restrictions on the parties’ rights to appeal arbitration awards can shorten a dispute by months or years. Unlike courts, however, arbitrators generally do not have power to issue default or summary judgment in simple cases where there is no real issue to be determined, and are generally required to hold a hearing of the claim.
Institutional arbitration proceedings are administered by an arbitration institute, such as the Georgian International Arbitration Centre (“GIAC”), Typically, Arbitration proceedings are conducted under the arbitration rules devised by the institution.
Ad hoc arbitrations are arranged solely between the arbitrators and the parties. They may adopt a readymade set of arbitration rules (such as the UNCITRAL Rules of Arbitration) or, less frequently, may be conducted under rules drawn up by the parties.
Institutional arbitration has the benefit of ensuring that the proceedings are administered in an orderly manner. Arbitration institutes may also exercise a degree of “quality control” over arbitrators and their awards. Adopting an established set of arbitration rules has the obvious benefit of avoiding arbitrators constantly having to “reinvent the wheel” in applying appropriate procedures.
Ad hoc arbitration may be cheaper insofar as no administration fees are payable to an arbitration institute. In principle, it may also provide the parties with flexibility to devise rules and procedures appropriate to their disputes. In practice, however, devising and agreeing to a set of ad hoc procedures will require substantial specialist input and detailed negotiation between the parties.
Yes. As arbitration is a consensual process, an arbitrator has no power to determine a dispute unless the parties have agreed to this and the requirements of the arbitration agreement have been complied with. The parties may agree in writing to arbitrate before a dispute arises (most commonly by an arbitration clause in a contract), or after a dispute has arisen.
An arbitration agreement provides the basis for an arbitrator’s jurisdiction. An arbitrator will not entertain a request for arbitration in the absence of an arbitration agreement. The parties may also modify or supplement the applicable arbitration rules by express provision in the arbitration agreement.
If a contract containing an arbitration clause is found to be invalid, this does not invalidate arbitration proceedings commenced under the arbitration clause. An arbitration clause is considered to be a separate agreement from the larger contract in which it is contained.
An arbitral tribunal will consist of either one or three arbitrators. The number of arbitrators is usually agreed in the arbitration clause, or may be agreed by the parties after a dispute has arisen.
There are several factors to be considered. A three-arbitrator tribunal will result in higher arbitration costs and may make it difficult to schedule hearings at short notice. A three-arbitrator panel is more appropriate for complex or technical disputes, and in cases where the parties are from jurisdictions with different legal systems or commercial customs.
The GIAC will determine whether the arbitration should be heard by one or three arbitrators.
In principle, the parties are free to agree to conduct the arbitration in any language they choose. In practice, the parties should consider the languages spoken by the parties, the languages that the agreements and the evidence will likely be in, and the extent to which the choice of language may affect the choice of arbitrators.
The place (or the “seat”) of the arbitration has two important legal consequences. First, it determines which jurisdiction’s arbitration laws apply to the proceedings and which courts may exercise supportive and supervisory powers over the arbitration. Second, it determines the place of the arbitration award for international enforcement purposes.
The cost of arbitration will vary significantly depending on the applicable fee rate/s of the tribunal, the number of arbitrators appointed, the approach taken by the tribunal and the parties with respect to applicable procedures, the types of issues in dispute, place of arbitration and the overall length of the proceedings.
A tribunal has power to grant any remedy that may be granted by the Georgian courts in commercial disputes, except to make any order that is binding on non-parties to the arbitration.
The Arbitral Tribunal shall render its final award within 6 (six) months. If the Arbitration Council considers necessary, it may extend the time limit on the basis of a reasoned request from the Arbitral Tribunal or on its own initiative.
Arbitral awards are usually final and not subject to review on the merits.