Question:
Dear Lawyer, in a contract, what are the advantages of including an arbitration clause compared to court proceedings? What costs might arise from choosing arbitration?
Answer:
Currently, dispute resolution methods are becoming more diverse and providing more options when disputes arise. One of the dispute resolution methods that has shown many advantages and gained considerable trust in commercial disputes is arbitration.
Advantages:
According to the principles and conditions for dispute resolution by arbitration as stipulated in Articles 4 and 5 of the 2010 Law on Commercial Arbitration, it can be seen that:
The principle of arbitration is to respect the agreement between the parties, so they are free to select arbitrators according to their preferences. This fosters trust between the parties throughout the dispute resolution process.
Arbitration proceedings are private, allowing parties to avoid concerns about the disclosure or public release of business secrets, which is especially beneficial today when businesses have many trade secrets or innovative technologies they want to keep confidential.
Arbitrators serve as independent and impartial third parties, ensuring fairness. This gives the parties confidence that there will be no bias or disadvantage in the arbitration process.
Arbitration is considered an effective dispute resolution method, often chosen as a last resort for resolving conflicts.
The procedures and timelines for arbitration are more flexible compared to court proceedings. While courts must adhere to prescribed procedures and legal regulations, arbitration allows the parties to negotiate these aspects more flexibly.
Arbitration generally offers a faster resolution since it involves a single hearing and the arbitral award is final, whereas court proceedings can involve appeals that may extend the time needed to resolve the dispute.
Costs that may arise from this method:
Arbitration Fees:
According to Clause 1, Article 34 of the 2010 Law on Commercial Arbitration, arbitration fees are charges for providing arbitration services for dispute resolution. Arbitration fees include:
- Arbitrators' fees, travel expenses, and other related costs for arbitrators;
- Fees for expert consultation and other assistance as required by the arbitral tribunal;
- Administrative fees;
- Fees for appointing arbitrators upon request by the disputing parties by the arbitration center;
- Fees for using additional services provided by the arbitration center.
Additional Costs:
- Legal fees paid to lawyers or legal counsel;
- Reasonable travel, accommodation, and other expenses incurred by the parties;
- Costs for hiring experts and assessors;
- Ancillary support costs related to documents and evidence (e.g., translation fees, interpreting, transcription, printing, delivery, notarization, consular legalization, and bailiff services);
- Travel expenses for witnesses;
- Any fees or costs requested by the appointing authority on behalf of the parties.
