INTRODUCTION

“Arbitration may be defined as the process by which a dispute or difference between two or
more parties as to their mutual legal rights and liabilities is referred to and determined judicially
and with binding effect by the application of law by one or more persons (the arbitral tribunal)
instead of by a court of law”1. Arbitration is an alternative process of solving disputes, and
hence, it coexists with the system of litigation. The main objective of having an arbitration
proceeding is to provide fair and impartial resolution of disputes without causing unnecessary
delay or cost which also has a binding effect, without going to the Court of law and getting
engaged in the long-drawn judicial procedure. In India, the alternative method of solving
disputes has been present from a long time, since trade and commerce started to grow outside
the country. Parties are entitled to choose the form of arbitration which they deem appropriate
in the facts and circumstances of their dispute.
Arbitration is often used for the resolution of commercial disputes, particularly in the context
of international commercial transactions. In certain countries such as the United States,
arbitration is also frequently employed in consumer and employment matters, where arbitration
may be mandated by the terms of employment or commercial contracts and may include a
waiver of the right to bring a class action claim. Mandatory consumer and employment
arbitration should be distinguished from consensual arbitration, particularly commercial
arbitration. Arbitration can be either voluntary or mandatory (although mandatory arbitration
can only come from a statute or from a contract that one party imposes on the other, in which
the parties agree to hold all existing or future disputes to arbitration, without necessarily
knowing, specifically, what disputes will ever occur) and can be either binding or non-binding.
Non-binding arbitration is similar to mediation in that a decision cannot be imposed on the
parties. However, the principal distinction is that whereas a mediator will try to help the parties
find a middle ground on which to compromise, the (non-binding) arbiter remains totally
removed from the settlement process and will only give a determination of liability and, if
appropriate, an indication of the quantum of damages payable. By one definition arbitration is
binding and non-binding arbitration is therefore technically not arbitration. Arbitration is a
proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties
to the dispute have agreed, or legislation has decreed, will be final and binding. There are
limited rights of review and appeal of arbitration awards. Arbitration is not the same as: judicial
proceedings, alternative dispute resolution, expert determination, and mediation.

1
Butterworths, Halsbury’s Laws of England (4th edition, 1991)
TYPES OF ARBITRATION
In India, Arbitration as a mode of resolution of disputes came to be adopted from the medieval
times when trade and commerce between traders in India and outside started growing2.
Arbitration existed in the form of informal agreements where disputing parties would agree to
and listen to the decision of a respected elder, whom they trusted implicitly. Even though
arbitration was known to Indian legal and business community, only the ad hoc form found
credence while the concept of institutional arbitration is relatively new. There may be differing
expectations and possible misunderstandings as parties of different nationalities come together
seeking to resolve disputes before an arbitral tribunal of also different nationalities. These are
the basic two forms of arbitration followed in varying degrees in different nations across the
globe3.
• Ad Hoc Arbitration
• Institutional Arbitration

AD HOC ARBITRATION AND ITS KEY FEATURES

Ad hoc Arbitration is a proceeding that is not administered by others and requires parties to
make their own arrangements for selection of arbitrators. An ad hoc arbitration is one which is
not administered by an institution such as the ICC, LCIA, DIAC or DIFC. The parties will
therefore have to determine all aspects of the arbitration themselves. It is infinitely preferable
at least to specify the place or 'seat' of the arbitration as well since this will have a significant
impact on several vital issues such as the procedural laws governing the arbitration and the
enforceability of the award. An ad hoc arbitration agreement may just provide that: “Disputes
between the parties shall be arbitrated in Paris”. Such an abbreviated arbitration agreement will
only work if the jurisdiction selected has established arbitration law. The parties then have to
determine all aspects of the arbitration like the selection and manner of appointment of the
arbitral tribunal, applicable law, procedure for conducting the arbitration and administrative
support without assistance from or recourse to an arbitral institution. The arbitral mechanism
is therefore structured specifically for the particular agreement or dispute. If the parties cannot
agree on such arbitral detail or, in default of agreement, laid down by the arbitral tribunal at a
preliminary meeting once the arbitration has begun, it will be resolved by the law of the seat

2
P.C. Rao & William Sheffield eds, ‘Alternate Dispute Resolution’, 13 (Universal Law Publishing co. Pvt.
Ltd.).
3
Gerald Aksen, ‘Ad hoc Verses Institutional Arbitration’, 2(1) ICC Bulletin (1991): 8-14
of arbitration4. It is open to the parties to adopt the rules framed by a particular arbitral
institution without submitting its disputes to such institution. Parties may when they cannot
agree on the arbitral tribunal may agree to designate an arbitral institutional as the appointing
authority. Parties can also incorporate statutory procedures such as applicable arbitral law or
adopt the UNCITRAL Arbitration Rules which are specifically designed for ad hoc arbitral
proceedings. If the parties cooperate and facilitate the arbitration, ad hoc proceedings can be
more flexible, cheaper and faster than an administered proceeding. It is a popular choice
because the parties do not have to pay administrative fees to the arbitral institution5. It is
commonly said that reaching agreement to arbitrate after a dispute has arisen is difficult, but
this really depends on whether the mutual needs of the parties to the dispute coincide with the
benefits of arbitration, such as having a decision maker with industry experience, privacy,
speed, and so on. Sometimes there are benefits to entering into an agreement to arbitrate after
the dispute has arisen because arbitration can be conducted under rules tailored to the dispute
rather than under what may have been a 'one size fits all' set of rules typically included in a
pre-dispute arbitration clause.

LEGAL IMPLICATION OF AD-HOC ARBITRATION

An ad hoc arbitration is one which is not administered by an institution and therefore, the
parties are required to determine all aspects of the arbitration like the number of arbitrators,
manner of their appointment, procedure for conducting the arbitration, etc. Ad hoc arbitration
is a proceeding that is not administered by others and requires the parties to make their own
arrangements for selection of arbitrators and for designation of rules, applicable law,
procedures and administrative support. Provided the parties approach the arbitration in a spirit
of cooperation, ad hoc proceedings can be more flexible, cheaper and faster than an
administered proceeding. The absence of administrative fees alone make this a popular choice.
The arbitration agreement, whether arrived at before or after the dispute arises, might simply
state that "disputes between the parties will be arbitrated", and if the place of arbitration is
designated, that will suffice. If the parties cannot agree on arbitral detail, all unresolved
problems and questions attending implementation of the arbitration, for example "how the
arbitral tribunal will be appointed", "how the proceedings will be conducted" or "how the award
will be enforced" will be determined by the law of the place designated for the arbitration,

4
Sundra Rajoo, ‘Institutional and Ad hoc Arbitrations: Advantages and Disadvantages’, The Law Review (2010)
5
Ibid
i.e., the "seat" of the arbitration. Such an abbreviated approach will work only if the
jurisdiction selected has an established arbitration law. The ad hoc proceeding need not be
entirely divorced from its institutional counterpart. Oftentimes the appointment of a qualified
and/or impartial arbitrator (actual or perceived) constitutes a sticking point in ad hoc
proceedings. In such case, the parties can agree to designate an institutional provider as the
appointing authority. Further, the parties can at any time in the course of an ad hoc proceeding
decide to engage an institutional provider to administer the arbitration. Parties wishing to
include an ad hoc arbitration clause in the underlying contract between them, or seeking to
arrive at terms of arbitration after a dispute has arisen, have the option of negotiating a
complete set of rules, establishing procedures which fit precisely their particular needs.
Experience has shown that this approach can require considerable time, attention and expense
without providing assurance that the terms agreed will address all eventualities.
Other options available to parties wishing to proceed ad hoc, who are not in need of rules drawn
specifically for them, or of formal administration and oversight, include:
(i) Adaption of the rules of an arbitral institution, amending provisions for selection of the
arbitrator(s) and removing provisions for administration of the arbitration by the institution,
(ii) Incorporating statutory procedures such as the United States Federal Arbitration Act (or
applicable state law) or the English Arbitration Act 1996,
(iii) Adopting rules crafted specifically for ad hoc arbitral proceedings such as the UNCITRAL
Rules (U.N. Commission on International Trade Law) or CPR Rules (International Institute for
Conflict Prevention and Resolution), which may be used in both domestic and international
disputes, and
(iv) Adopting an ad hoc provision copied from another contract. Risks accompanying two of
the available options are worthy of particular note. Incorporating rules drawn by an institutional
arbitration provider, amending provisions for appointment of the arbitrator(s) and excising
provisions requiring administration by the provider, carries with it the risk of creating
ambiguities in the institutional rules as amended, despite efforts to redraw them to suit an ad
hoc proceeding. It is also possible that in the adaptation process the parties may inadvertently
create an institutional process. Copying an ad hoc arbitration clause from another contract may
also result in later grief if the purloined clause was originally crafted for a particular, possibly
unique, set of circumstances and/or was drafted taking into account different applicable
arbitration law.
Ad Hoc Arbitration: Procedure and Practice
Commencing an Ad Hoc Arbitration

The Arbitration Agreement

For arbitrations that have their seat in England, the arbitration agreement in an ad hoc
arbitration need only record the parties' wish that any dispute be resolved by arbitration. In that
case, the agreement would be supplemented by the provisions contained in the 1996 Act.
Ideally, however, the parties would have given consideration and added provisions into the
arbitration agreement regarding some, if not all, of the following factors: the constitution of the
tribunal and the method of its appointment; (6) the language of the arbitration; the procedure
to be followed; the governing law of the arbitration; and confidentiality.
The 1996 Act and Ad Hoc Arbitrations
“To the extent that the parties have not created their own procedures or adopted existing ad hoc
rules, as noted above the provisions of the 1996 Act provide a framework for the conduct of ad
hoc proceedings where the seat is in England.6” In what follows, the way in which such ‘fall-
back’ provisions for the conduct of an ad hoc arbitration operate is considered at each stage of
the process.
Beginning an Ad Hoc Arbitration
“The parties to an ad hoc arbitration can agree when arbitral proceedings are to be regarded as
commenced7.” When there is no agreement between the parties on that issue, and no arbitral
rules have been chosen which might resolve the question, section 14 of the 1996 Act contains
default provisions that will apply. “The commencement date under section 14 will turn on the
precise mechanism for the appointment of a tribunal chosen by the parties, but in all cases the
key to starting proceedings will be the service by one party on the other of a notice in writing8.”
Choice of Arbitrators

6
Section 2(1) of the 1996 Act.
7
“The point at which an arbitration can be considered to be commenced can be an important consideration in
terms of both statutory time limits (e.g. see the Limitation Act 1980) and any contractual time limits.”
8
“If the agreement is silent on the question of when the arbitration is deemed to have commenced, s. 14 of
the 1996 Act provides as follows:
(1) In those cases where the arbitration agreement specifies the arbitrator, arbitral proceedings will be
regarded as commenced when one party serves on the other party a notice in writing requiring them to submit
the matter to the designated arbitrator.
(2) In those cases where the arbitrator is to be appointed by the parties, arbitral proceedings will be regarded
as commenced when one party serves on the other party a notice in writing requiring them to appoint an
arbitrator or to agree to the appointment of an arbitrator.
(3) In those cases where the arbitrator is to be appointed by a person other than a party to proceedings,
arbitral proceedings will be regarded as commenced when one party gives notice in writing to that person
requesting him to make the appointment in respect of the matter.”
“In accordance with the principle of party autonomy, the parties to an ad hoc arbitration are
free to choose the number of arbitrators that will form the tribunal and whether there is to be a
chairman or an umpire9.” “If the parties appoint an even number of arbitrators, there is a
presumption that a third arbitrator will be appointed to preside as chairman, unless the parties
agree otherwise10.” In the absence of agreement as to the number of the arbitrators, section
15(b) of the 1996 Act provides that a sole arbitrator will be appointed. The case of “Itochu
Corporation v. Johann M.K. Blumenthal GMBH & Co KG & Anr11 considered the
interpretation of section 15(3) and is a reminder of how carefully ad hoc (or indeed any)
arbitration clauses should be drafted. In the said case, the arbitration agreement in a letter of
guarantee had provided that: Any dispute … shall be submitted to arbitration held in London
in accordance with English law, and the award given by the arbitrators shall be final and
binding on both parties. In Itochu Corporation, the Court of Appeal agreed with the judge below
that section 15(3) is clearly engaged where an agreement (or ‘merely an indication of an
agreement’) about ‘arbitrators' did not specify the number. A sole arbitrator, rather than a
tribunal of three arbitrators was therefore to be appointed.”
Appointment of Arbitrators under the 1996 Act.
The parties to an ad hoc arbitration are free to agree upon the procedure for the appointment of
the arbitral tribunal. “In the event that they are unable to agree on the selection of an arbitral
panel and have not agreed what is to happen in the event of a disagreement, section 16 of the
1996 Act sets out a default procedure for the appointment of the tribunal12.” Where there is a
failure to appoint the tribunal, under section 18 of the 1996 Act any party to the arbitration
agreement (upon notice to the other party or parties) may make an application to the court for

9
“An umpire may only be appointed where there is express agreement between the parties to that effect (s.
21 of the 1996 Act).”
10
“Section 15(2) of the 1996 Act.”
11
“[2012] EWCA Civ 996.”
12
“Section 16 of the 1996 Act provides for a default procedure, which can be summarised as follows:
(1) If the tribunal is to consist of a sole arbitrator, the parties must jointly appoint the arbitrator not later than
28 days after service of a request in writing by either party to do so.
(2) If the tribunal is to consist of two arbitrators, each party must appoint one arbitrator not later than 14 days
after service of a request in writing by either party to do so.
(3) If the tribunal is to consist of three arbitrators, each party shall appoint one arbitrator not later than 14
days after service of a request in writing by either party to do so, and the two so appointed shall forthwith
appoint a third arbitrator as the chairman of the tribunal.
(4) If the tribunal is to consist of two arbitrators and an umpire, each party must appoint one arbitrator not
later than 14 days after service of a request in writing by either party to do so and the two so appointed may
appoint an umpire at any time after they themselves are appointed and shall do so before any substantive
hearing or forthwith if they cannot agree on a matter relating to the arbitration.
(5) In any other case, the provisions relating to the failure of the appointment procedure in s. 18 of the 1996
Act apply.”
it to resolve the deadlock by deciding the composition of the arbitral tribunal. “The court has
the power to give directions as to the making of any necessary appointments, to direct that the
tribunal shall be constituted by such appointments as have been made, to revoke any
appointments already made, and to make any necessary appointments itself. The court's
authority is clearly wide: it can create and completely reconstitute an arbitral tribunal, and any
appointments it makes have the same effect as if they were made with the agreement of the
parties13.”

Procedure in Ad Hoc Arbitrations

The 1996 Act provides flexibility for the parties to an ad hoc arbitration to agree the procedural
steps that are to be taken. “Any procedural steps agreed by the parties must comply with the
tribunal's overriding duty to ‘adopt procedures suitable to the circumstances of the particular
case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution
of the matters to be determined’14”. “Any agreement that falls short of those principles could
be held to be void and therefore unenforceable15.”
“In the absence of agreement between the parties, the 1996 Act empowers the arbitral tribunal
to prescribe appropriate procedural measures16.” In doing so, the tribunal must comply with its
overriding duty. The arbitral tribunal has the authority to decide all procedural and evidential
matters, subject to the agreement of the parties, including:
(1) When and where proceedings are to be held;
(2) The language in which proceedings are to be conducted;
(3) Whether written statements of claim or defence are to be used;
(4) Whether and to what extent document production will take place;
(5) Whether and to what extent oral submissions should be permitted; and
(6) The rules and form of evidence17.
The wide latitude ad hoc arbitration affords parties to agree on the procedural steps that govern
their dispute makes it difficult to provide a definitive overview of the steps that will occur in

13
“Section 18(2) to (4) of the 1996 Act. Note also that pursuant to s. 18(5), the leave of the court is required
for any appeal from a decision of the court under s. 18. The Court of Appeal in Itochu (supra n. 11), citing
Henry Boot Ltd v. Malmaison Hotel Ltd [2001] QB 388, confirmed that, where s. 18(5) of the 1996 Act applies,
the reference to ‘the court’ is to the court at first instance. Accordingly, where leave is refused by the judge
below, the Court of Appeal cannot itself grant leave to appeal. This is part of the policy embodied in the 1996
Act of restricting appeals.”
14
“Section 33(1)(b) of the 1996 Act.”
15
“DAC Report, paras 155–158.”
16
“Section 34 of the 1996 Act”
17
“Section 34 of the 1996 Act.”
any particular arbitration. Also, the complexity of the procedure may to some extent be
influenced by the subject matter of the arbitration and the amounts at stake. In a small-scale
dispute, for example, the parties and tribunal may be minded to keep the procedure as short
and simple as possible. However, in a larger scale, commercial dispute, the following steps are
likely to occur:
(1) The tribunal is likely to encourage the parties to set out their positions clearly and to seek
to narrow the issues in dispute from an early stage.
(2) The tribunal will almost always make provision for written statements of case, in which
each party sets out its claim – or defence, as the case may be, – in writing. These statements
provide the parties with an opportunity to set out their version of events, as well as the factual
and legal basis for their position and are generally supplemented by fact and/or expert witness
statements. There may then be subsequent rounds of pleadings if required (i.e. the claimant's
reply and the respondent's rejoinder).
(3) The tribunal is also likely to make provision for document production. The tribunal could,
in theory, order document production similar in scope to ‘standard disclosure’ in English court
proceedings, which requires a party to disclose: (1) documents on which it relies; (2) documents
that support another party's case; and (3) documents that adversely affect its – or another party's
– case. In most international commercial ad hoc arbitrations, however, the tribunal will tend to
order more limited document production. It is common for parties to an ad hoc international
arbitration to adopt the IBA Rules on Evidence to provide an objective standard for assessing
the relevance of documents. The IBA Rules on Evidence provide for an initial disclosure of the
documents on which a party relies, after which the parties are able to request the production of
further, specific documents or narrow and specific categories of documents. Even if the IBA
Rules on Evidence are not formally adopted by the parties, it is common to find them being
referred to as a ‘benchmark’ by parties and being given weight by tribunals as they decide on
appropriate orders.
(4) “The tribunal may appoint experts or legal advisers to report to it or assessors to assist it on
technical matters18.” It is, however, almost always the case that the tribunal will adopt a similar
procedure to that employed in English court proceedings. In such proceedings, parties tend to
instruct their own experts and are permitted to put written questions to experts. “Experts also
may be required to discuss their reports before the final hearing with a view to producing a
joint memorandum of issues upon which they disagree, in order to narrow the issues in dispute

18
“Section 37 of the 1996 Act.”
between the parties. Experts typically will be required to provide oral evidence at a hearing19.”
(5) The prevailing practice in England in substantial commercial matters is for there to be a
final oral hearing (by contrast, many small, low value matters are commonly decided ‘on the
papers')20. This may well be preceded by one or shorter procedural meetings, depending on the
complexity of the case, in which, among other things, the procedural timetable is fixed and/or
procedural applications are heard. It is standard practice in England for both witnesses of fact
and expert witnesses to be cross-examined.
(6) “The allocation of costs between the parties is at the sole discretion of the tribunal, although
the 1996 Act contemplates that costs should follow the event unless – based on the facts of the
case – that approach is inappropriate21.”

The Award
“Unless the parties agree otherwise, the 1996 Act empowers arbitrators to make either a final
award that disposes of all the issues to be determined, or more than one partial award at
different times and on different aspects of the matters to be determined22.”
“The arbitral tribunal may, in particular, make a partial award relating to an issue affecting the
whole claim – such as jurisdiction – or to part of the claim(s) or cross claim(s) submitted to it
for decision. If the tribunal does so, it is required to specify in its award the issue, or the claim
or the part of the claim(s) disposed of23.”
“An award made by a tribunal in England may, by permission of the court, be enforced in the
same manner as a judgment or order of the court and to the same effect24.”

Remedies
The powers of the arbitral tribunal with regard to remedies and the award of interest also can
be decided by the agreement of the parties (sections 48 and 49). “In the absence of any such
agreement, the 1996 Act provides the tribunal with the power, among other things, to make a

19
“In English court proceedings, experts owe their duty to the court and not to the parties and their role is to
provide independent assistance to the court in the form of objective, unbiased opinion. Expert evidence
should, therefore, be seen to be the independent product of the expert, rather than influenced in its form or
content by the demands of litigation.“
20
“Hearings can be held at a number of venues, ranging from the offices of one of the parties' legal
representatives to a purpose built dispute resolution centre such as the International Dispute Resolution
Centre in London.”
21
“Section 61 of the1996 Act.”
22
Section 47(1) of the 1996 Act.
23
“Section 47(3) of the 1996 Act.”
24
Section 66(1) of the 1996 Act.
declaration as to any matter to be determined in the proceedings, order the payment of a sum
of money (in any currency) and grant injunctive relief (other than injunctive relief confined to
the English High Court and specified county courts)25.”
With regard to interest, a tribunal may award simple or compound interest from such dates, at
such rates and with such rests as it considers meets the justice of the case on all or part of any
amount awarded by the tribunal or claimed and outstanding at the commencement of the
proceedings but paid before the date of the award. “The tribunal may also award interest from
the date of the award until payment on the amount of any award and any interest or costs26.”

ADVANTAGES OF AD HOC ARBITRATION:

Suitable for all types of claims

Ad hoc arbitration if properly structured should be less expensive than institutional arbitration.
It is suitable for use with for all types of claims, large or small. Bigger corporations may prefer
ad hoc arbitration as they often have large and sophisticated in-house legal departments and
have accrued experience in managing arbitration proceedings. Ad hoc arbitration may be
designed according to the requirements of the parties, particularly where the stakes are large or
where a state or government agency is involved. The parties are in a position to devise a
procedure fair and suitable to both sides by adopting or adapting to suitable arbitration rules.

Control of the process

Parties are in control of the process. They can write their own rules, set their own timelines and
move the arbitration along their own pace. The arbitral tribunal and to a lesser extent the parties
have to shoulder the burden of organising and administering the arbitration proceedings.

Agreed procedures
The effectiveness of ad hoc arbitration depends upon the parties’ willingness to agree upon
procedures at the time when they are already in dispute. If the parties do not cooperate in
facilitating the arbitration, there could be loss of time in resolving the issues. “There may be

25
“Section 48(1)–(5) of the 1996 Act. An arbitral tribunal in England and Wales is not permitted to award
punitive damages for breach of contract and can only do so in limited tort actions. Where the parties'
arbitration agreement is, however, wide enough to encompass claims under a foreign statute that provides for
special or punitive damages, a tribunal may be able to award such damages in an arbitration with its seat in
London.”
26
“Section 49 of the 1996 Act.”
repeated recourse to the courts to determine contested interlocutory issues which may delay the
arbitration proceedings27”.

Flexibility
Ad hoc arbitration is flexible in allowing the parties to cooperate and decide upon the dispute
resolution procedure. It is only natural that once a dispute arises, parties tend to disagree even
on the most basic of things. For example, parties of different nationalities and jurisdiction may
misunderstand each other. They may find it difficult to agree and cooperate, which can delay
the arbitration and frustrate the resolution of the dispute.

Ready-made arbitration rules

Parties can avoid such disagreement and avoid delays if they agree to conduct the arbitration
under for example, UNCITRAL selected arbitration rules. The result is less time and legal
expense spent in determining complex arbitration rules to be used in the arbitration.

Sovereignty issues
State parties may prefer ad hoc arbitration if they are concerned that a submission to
institutional arbitration devalues their sovereignty particularly when the disputes involve public
interest and large sums of public monies. They would want the flexibility to define issues
quickly and also adopt acceptable procedures; for example; they may wish to file simultaneous
pleadings as neither party would want to be a respondent as they both believe they have
justifiable claims against each other.

Cost-effectiveness
Ad hoc arbitration is less expensive than institutional arbitration. The parties only pay fees of
the arbitral tribunal, lawyers or representatives, and the costs incurred for conducting the
arbitration, i.e. expenses of the venue charges, etc. They do not have to pay the arbitration
institution’s administration fees which, if the amount in dispute is considerable, can be
prohibitively expensive. The parties also have the flexibility of holding the hearings at any
venue. Normally, an institutional arbitration will be held in the institution premises.

27
Arkin, H L, “International Ad Hoc Arbitration: A Practical Alternative”, International Business Lawyer,
(January 1987)
Remuneration of arbitral tribunal
In ad hoc arbitrations, the parties will have to agree the scale of remuneration with the arbitral
panel and agree fees directly with the arbitral tribunal who will have to collect the money
directly from the parties. Although most arbitrators are detached in dealing with these matters,
there will inevitably be some degree of distraction which may lead to awkwardness for all
concerned. There is no opportunity for negotiation of the fees in institutional arbitration, which
requires the parties pay arbitral tribunal fees as stipulated by the institution.

DISADVANTAGES OF AD HOC ARBITRATION

• Parties in ad hoc arbitrations normally have to rely on their own good judgment as to the
identity and quality of the individual arbitrator. This may be particularly difficult, in the context
of international arbitration, as a party may not be able to choose a well-known arbitrator from
his country due to objections of national bias and would have little, or no, knowledge of
arbitrators outside his country.
• Only effective when both parties are ready to cooperate with each other as it depends for its
full effectiveness upon the spirit of cooperation between the parties and their lawyers backed
up an adequate legal system in the place of arbitration.
• Parties when represented by lay persons may lack the necessary knowledge and expertise to
set up the arrangements to conduct an ad hoc arbitration. Such parties, especially if of different
nationalities, may make misinformed decisions which may affect the arbitration proceedings.

Ad hoc – less expensive than institutional?

In reality, an ad hoc arbitration may not prove to be less expensive than the institutional process.
Firstly, the parties are required to make arrangements to conduct the arbitration but they may
lack the necessary knowledge and expertise. Arbitrations are generally conducted by people
who are not lawyers - however, this may result in misinformed decisions especially in
international commercial arbitration.
Secondly, where there is lack of cooperation between the parties or delay on the part of the
tribunal conducting the arbitration or writing the award, a party may need to seek court
intervention. Litigation costs would not only negate the cost advantages of ad hoc arbitration,
but also the parties' intention to avoid the courts through alternative dispute resolution methods.
Thirdly, in complex cases the tribunal may seek to appoint a secretary to deal with the
considerable administrative work involved. The additional costs of the secretary's fees will add
to the cost burden of the arbitration.
 Although ad hoc arbitration is more flexible and often best suited to the parties' individual
needs, it will only be cost effective where:
 There is the required cooperation between the parties;

 The parties understand arbitration procedures; and

 The arbitration itself is conducted by experienced arbitrators.

Conclusion
It is said that parties are the masters of arbitration. However this is questionable in institutional
arbitration, where the institution effectively acquires the parties' powers to make decisions -
such as the appointment of arbitrators – and can impose their will upon the parties. This seems
against the spirit of arbitration. Although ad hoc arbitration may seem preferable in today's
modern and commercially complex world, it is really only suitable for smaller claims involving
less affluent parties in domestic arbitrations.
In the context of international commercial disputes, institutional arbitrations may be more
suitable - despite being more expensive, time consuming and rigid. The institutional process
provides established and up to date arbitration rules, support, supervision and monitoring of
the arbitration, review of the awards and strengthens the awards' credibility.
The particular circumstances of the parties and the nature of the dispute will ultimately
determine whether institutional or ad hoc arbitration should prevail.