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Home > Legal & Financial > Jurisdiction: submission to court or arbitration?

Jurisdiction: submission to court or arbitration?

In contract Law, arbitration is an alternative dispute resolution mechanism in which the parties instead to try to resolve the conflict they appoint a third party to do so. In other words, it   is a way to resolve a dispute without going to ordinary jurisdiction.

The arbitration  is mainly a private mechanism for the resolution of disputes that might be accepted in a contract in the terms of the arbitration agreement , where a judge, court, prosecutor or any other organs or figures of the traditional judicial system do not intervene.

The parties, by mutual agreement, decide to appoint an independent third party, called an arbitrator, or an arbitration court, which will be in charge of resolving the conflict. The arbitrator, in turn, will be limited by the agreement between the parties to issue the arbitration resolution being bound to apply Law accurately However the arbitrator may in general adopt whatever procedure he chooses and is not bound by by the exclusionary rules of of the law of although in any case he must follow the rules of natural justice. It must be done in accordance with the legislation chosen by the parties, or even based solely on the principle of equity, if this has been agreed.

Arbitration agreements are widely used in international business operations. And it is here in the international field where it has its modern origins: the first example can be found in the Jay Treaty (1794) between USA and UK, which provided for the determination of legal disputes between states by mixed commissions. The Hague Conventions of 1899 and 1907 contained the main rules of arbitration that have now become part of customary international law.

In Spain it is frequent the submission to arbitration to the Bar (Colegio de Abogados) in legal matters and to the  Commerce Chambers and organizations (Cámaras de Comercio) , in case of economic disputes. The arbitration procedure is established in the Ley 60/2003, de 23 de diciembre, de Arbitraje (Arbitration Act) which is based in the United Nations UNCITRAL Model Law on International Commercial Arbitration of 1985 (Arbitration Rules). The main guidelines  of the Spanish Arbitration Act  are:

  • to harmonize the legal regime of arbitration (in particular for international commercial arbitration)
  • to promote the dissemination of the practice of arbitration.
  • to promote the unity of criteria in the application of arbitration
  • to promote greater efficiency in conflict resolution.

In  maritime and admiralty Law, besides the UN Arbitration Rules and the ones of the International Chamber of Commerce (ICC)  we have the some specific arbitration organs like the Society of Maritime Arbitrators New York, the Chambre Arbitrale Maritime de Paris and the London Maritime Arbitration Association (LMAA). This last one is for example the arbitration  appointed in the standard MYBA Charter Agreement. At this point we have to  say that even for important international maritime Law disputes  submission to LMMA is widely used and very effective this is not normally the case by small claims for example in charter activity . We have seen cases in our Firm in which because of such submission to LMAA arbitration as an alternative to the judicial ordinary jurisdiction dispute was impossible launched due to high expenses, and what is more important, it also stopped any lawsuit.

Our recommendation therefore  would be,  before adopting submission to court or to arbitration in a commercial or civil agreement,  first analyse and foresee possible disputes, the amount of the hypothetical petitions and all expenses involved in both cases and compare, and then decide if court or arbitration.

Arbitration. It is,

Carlos Espinosa

Solicitor & Tax Adviser

+34 627 41 32 01