Arbitration is an alternative form of administration of justice, in which one or more impartial arbitrators give a binding decision on the dispute in question. Arbitration proceedings are not instituted before the ordinary court, but before one or more impartial arbitrators.
It concerns private justice that is arranged and financed by the parties and the industry organisations concerned, without intervention from the government. The arbitration boards have their own procedural rules, but in the Arbitration Act (Book 4 of the Dutch Code of Civil Procedure) the manner in which an arbitration agreement is formed has been arranged, and the requirements set to the procedure have been recorded.
Advantages of arbitration
Arbitrations offers many advantages compared to litigation before the ordinary court. For example, it is possible to keep the proceedings (and the outcome) secret. Besides, there is in principle no possibility of appeal against an arbitral award, so lengthy and expensive proceedings are restricted to a minimum. The greatest advantage, however, is that in case of arbitration, the dispute can be submitted to a tribunal of experts from a certain industry. Various industry organisations have their own arbitration boards and disputes committees. The Arbitration Board for the Building Industry is one of the best-known and biggest boards. In addition, the Netherlands Arbitration Institute settles a broad range of (commercial) disputes.
A dispute can only be subjected to arbitration if the parties have agreed on arbitration. An arbitration agreement is also called an arbitration clause. This clause may have been included in the contract, but more often it is a standard component of the applicable General Terms and Conditions. For example, many entrepreneurs in the construction industry apply the Uniform Administrative Conditions for the Execution of Works (Dutch UAV) which stipulate that disputes are submitted to the Arbitration Board for the Building Industry, to the exclusion of the ordinary court. Arbitration may also be agreed at a later time (ad hoc arbitration).
Arbitration proceedings and regular civil proceedings
As a rule, arbitration proceedings follow the same course as regular civil proceedings. There are rules for evidence, witnesses, challenge, and joinder. Many arbitration regulations also have the possibility of arbitration in preliminary relief proceedings. If so desired, the parties can appoint arbitrators themselves (usually on the basis of a list of the arbitration board in question). Normally, arbitration proceedings start with the submission of a request for arbitration or a statement of claim. Just like in ordinary proceedings, the other party is given the opportunity to reply in writing. The other party may also bring a counterclaim. After the exchange of written procedural documents, an oral hearing usually takes place.
Arbitral award is binding
A judgment given by an arbitrator is called an arbitral award and is just as binding on the parties as an ordinary judgment. To enforce the judgment, the party found for will first have to ask the court for leave to enforce. In this so-called exequatur procedure, the court only tests the judgment for reasonableness. The case will not be reviewed.
Lawyer for arbitration proceedings
Though arbitration does not require representation by a lawyer, the parties are often assisted by counsel, especially if the dispute concerns a major financial interest.