Private Arbitration of Business Disputes
What is arbitration? Arbitration is a form of dispute resolution in which the parties retain an arbitrator or arbitrators to hear and decide their case. Arbitration is sometimes called “private litigation” as the processes resemble the public litigation process, but involve an adjudicator hired by the parties rather than a judge. In some cases, arbitration may be preferable to litigation.
When do disputes go to arbitration?
Arbitration often arises when a contract between two parties includes a clause stipulating that disputes be settled by arbitration rather than traditional litigation. In addition, some statutes require disputes to be referred to arbitration rather than the courts. In such cases, if litigation is commenced by one party in a court in British Columbia, that court may refuse to hear the case if another party objects and insists that the dispute be resolved by arbitration.
Parties may also agree to submit their dispute to arbitration even if it is not required by contract or statute. Whether arbitration is mandatory, or the parties agree to submit their dispute to arbitration, the process in British Columbia is governed by the Arbitration Act, RSBC 1996, c. 55 for domestic arbitrations and the International Commercial Arbitration Act, RSBC 1996, c. 233 for international arbitrations (the Acts).
Benefits of Arbitration
Arbitration may offer several advantages when compared with litigation, including:
- a faster process
- more flexibility and control over the process
- the availability of subject-matter expert arbitrators
The parties to an arbitration process have greater control over the timing of processes than in litigation, in which the rules of court, statutes, and the availability of court resources can determine the pace of the process. If the parties wish to have a dispute determined in a streamlined fashion, arbitration may offer a faster and more flexible method for the determination of the dispute. Arbitration is also an attractive option for some where qualified subject-area experts are available to act as arbitrators, and whose expertise allows them to hear and decide an issue in an expedited fashion compared to a judge who may not be as familiar with the issues in question. If parties wish to avoid a protracted and public dispute in the courts, the confidentiality offered by arbitration will be an attractive alternative to litigation.
The Arbitration Process
The British Columbia International Commercial Arbitration Centre (BCIBAC) is a not-for-profit body created by the British Columbia government to administer the conduct of arbitration in British Columbia under the authority granted by the Acts. It sets standard rules of procedure for domestic and international arbitrations which apply to all arbitrations unless the parties agree to modify the rules of procedure. Unless the parties agree otherwise, arbitrations are heard by a single arbitrator as required by the BCIBAC’s rules.
Where an agreement between the parties provides for mandatory arbitration, or a statute requires arbitration, a party can commence arbitral proceedings by serving the other party with a Notice to Arbitrate and by filing the Notice and paying the applicable fee to the BCICAC. If the parties agree to submit their dispute to arbitration, they may file a Joint Submission to Arbitrate with the BCICAC. The BCICAC provides a full range of arbitration and dispute resolution services to parties, but parties are free to conduct arbitrations by agreement without the BCICAC’s involvement. Without a prior agreement mandating arbitration or an agreement between the parties to submit their dispute to arbitration, one party may not force another to resolve a dispute through arbitration.
An arbitrator may or may not have jurisdiction to decide a matter. Unlike a court of law which has inherent jurisdiction when parties, events, and property are located within its jurisdiction, an arbitrator is a private adjudicator and does not possess jurisdiction unless the parties have given their consent to the arbitrator’s jurisdiction. This agreement is usually found through an arbitration clause in an agreement or contract which the parties have previously agreed to, or by the parties express agreement to refer a matter to arbitration when they prefer the arbitration process to litigation in a court of law.
Express agreements are simple enough to understand. However, where the parties do not agree that a clause in an agreement or contract constitutes an agreement to arbitrate, the arbitrator may have to determine whether or not he or she has jurisdiction. Another important consideration is an arbitrator’s jurisdiction to set their own procedure and make orders. In general, as long as an arbitrator obeys the rules of “natural justice” (a set of practices, principles, and rules for the fair hearing of disputes), he or she may set whichever process he or she wishes.
There is some controversy about whether an arbitrator has jurisdiction to grant equitable remedies following a hearing. Equitable remedies are certain types of orders which are not strictly “legal” but are instead concerned with fairness between the parties. An arbitrator may not be able to make such orders where an agreement to arbitrate, either by express agreement or an arbitration provision in an agreement or contract does not allow the arbitrator to make such rulings. Generally, all rulings made by an arbitrator are subject to review by a court of law, but the extent of the review can be limited.
As noted above, an arbitrator may decide the process that he or she wishes to follow for the adjudication of a dispute. Provided the process obeys the rules of natural justice it will typically be respected by a court. However, arbitrators may set processes for the exchange of evidence between the parties, and the hearing of evidence which are quite different from those utilized by courts of law. Experienced counsel may assist in setting the rules of procedure to be used in an arbitration by agreement, to craft the rules of procedure to the specific types of evidence which are of greatest interest to the parties to the dispute. The choice of arbitrator may also be determined at least in part by the type of dispute and the type of evidence which a dispute may entail. For instance, where a dispute involves a great deal of expert opinion evidence about a technical issue, the parties should retain an arbitrator who is familiar with the types of issues and information which will be considered in the dispute. Experienced counsel may assist the parties with choosing an appropriate arbitrator and the correct procedure to be followed in adjudicating a specific dispute.
The decision of an arbitrator is called an award, and is binding on the parties like the judgment of a court. The parties can register the award with the Supreme Court of British Columbia for the purposes of enforcement, if necessary.
Arbitration may be attractive to you if you are seeking to resolve a dispute and are concerned about the delays, inflexibility, and public nature of the litigation process.
The Introduction of a New Arbitration Act
On March 5, 2020, the B.C. legislature passed Bill 7 into law. The bill replaces the Arbitration Act, RSBC 1996, c 55 (the “Old Act”) with a new Arbitration Act (the “New Act”). The New Act comes into force on September 1, 2020. Please refer to our blog with some initial observations with respect to how Bill 7 will impact arbitration in B.C.