Why & when arbitration is better than a court

If a contract is being considered, it is necessary to pay special attention to the regulations regarding the resolution of disputes, which are usually set out in their entirety in the final articles of the contract, points out Lukáš Štefánik from the law firm Soukeník - Štrpka.

When is it worthwhile to resolve a dispute through international arbitration? What are the advantages of such a procedure compared to general courts?

In most cases, arbitration proceedings tend to be more efficient because there is a large degree of freedom. This concerns not only the composition of the tribunal, which decides whether it’s a sole arbitrator or a multi-member tribunal, but also the process itself. This concerns, for example, the combination of online and faceto-face formats, be they hearings or procedural meetings, and the location of the arbitration proceedings, which can change or can be fixed during the entire process. So freedom is the biggest benefit.

Lukáš Štefánik. (source: Courtesy of Soukeník - Štrpka)

Although arbitration is said to be cheaper, this may not always be the case. In particular, better-known institutions such as the Arbitration Court of the International Chamber of Commerce in Paris have relatively significant fees for conducting arbitration proceedings, including remuneration for arbitrators. When we look at the acceptance of the decisions of such tribunals, which operate under the management of these institutions, it is significantly higher than in the case of the judgments of general courts. This is precisely because of flexibility. Given that the parties have the opportunity to determine who will decide their dispute, they are ultimately more able to accept the outcome, because at the end of the day they know that it was judged by someone who understands the issue at hand.

So, trust in the judgments of general courts is lower because the judges in these courts are not experts?

In the case of general courts, the problem can arise that if the judge decides disputes from different areas of law, then they cannot be a complete expert in, say, construction law and contracts that follow the yellow FIDIC regime [the version of standardised contract models issued by the International Federation of Consulting Engineers – Ed.]. So this is historically a big win for arbitration. We will see how the situation changes as part of the judicial reform, as there is a tendency there to specialise judges. On the other hand, it probably won’t be news when I say that there are both good and bad people everywhere. Even among judges we can find experts, but also so-called formalists. There is a group of judges who approach backlog cases precisely through the prism that sometimes they don’t go into depth, but try to decide the case based on some formality. Not infrequently, they look for a way to get rid of the court proceedings, so to speak, without deciding on the merits. And that can be harmful.