ABADIE Séverine – BELATRECHE Louisa – BIBAS Audrey
Semestre 6 Finance – Group D
POLE UNIVERSITAIRE LEONARD DE VINCI
ECOLE DE MANAGEMENT LEONARD DE VINCI
Advantages and drawbacks of arbitration
The arbitration is a way to settle a dispute. The arbitration is confided to private
individuals, who are chosen by the parts : It is a current practice in commercial disputes. The
arbitration results inevitably from a contract. Two access modes are possible. The contractual
partners can, after a dispute, decide to seize an arbitration jurisdiction; we speak about
compromise of arbitration. In the different hypothesis where before any contesting, the
partners decide contractually to subject to the arbitration their possible dispute, an arbitration
clause settles their situation.
What are advantages and drawbacks of arbitration?
o In a first part, we will talk about the two modes of arbitration.
o In a second part, we will see the advantages of arbitration.
o At the end, we will treat the drawbacks.
I) The Two modes of arbitration
a) The compromise of arbitration
The compromise of arbitration is the agreement by which the parts to a contract
decide to submit to the arbitration jurisdiction the conflict which sets them. The compromise
must, to be valid, be noticed in writing, determine the point of contention, the identity of the
arbitrators or the modalities of their designation.
b) The arbitration clause
The arbitration clause attributes in advance to an arbitration jurisdiction the disputes
that the execution of an agreement could arouse. As the compromise, the arbitration clause
must be written, mention the identity or the modalities of the arbitrators’ designation. She
must be inserted into the main agreement or into the document to which this one refers.
II) Advantages of arbitration
The advantages recognized by the arbitration for a company are:
a) The confidentiality
The companies which do not want to reveal their dispute prefer to use the appeal to the
arbitration. Indeed, in an arbitration procedure, the competitors or the journalists have no
access to the elements of the dispute.
b) The neutrality
The neutrality is the highest quality of the arbitration in international problems.
Indeed, when each of the parts belongs to a different country, nobody of them wants to agree
to submit himself to the jurisdiction of the other one, afraid of being discriminated for the
benefit of the national.
c) The appeal to a specialist
The possibility of having as arbitrate a specialist of the subject or the socio-
professional environment in which was born the dispute.
d) The rapidity to obtain a decision
Many institutions of arbitration forecast in their settlement of accelerated procedures if
necessary. And it would be false to say that the arbitration would always be faster than the
French justice but is it certainly with regard to certain foreign justices.
e) The less conflicting character of the arbitration procedure
The mission of the arbitrator is to reconcile the parts. The arbitrator is permanently
attentive to their will, a more direct and followed relation which he maintains with them by
more frequent meetings, in less formal hearing.
So, the arbitration allows to facilitate a link and the continuation of the relations between
them. Sometimes it seems difficult because of the attitude of the parts, or still the more or less
strong personal authority of the arbitrator.
III) Drawbacks of arbitration
a) The cost
Unlike the judges, the arbitrators not being paid by the State, will owe by the parts.
Their fees are variable, it depends on the time, on the difficulty of the conflict of the
competences and on the fame of the arbitrator, etc.
b) Capacity of obstruction, for the part of bad faith
In front of the courts, the parts show an inventiveness without flaw allowing to delay a
procedure which they know fatal for their interests. It occurs when a part is of bad faith.
c) Few ways of resort
There is only a number very limited by possibilities of resort against an arbitration
judgment. For that reason, it is indispensable that the company adopts a approach in the
choice of the mode of arbitration, but also throughout the procedure.
d) The absence of case law
It can arrive that the company bound by several similar contracts wants asking in the
future, with it other co contracting parts, for the intervened decision. With an arbitration
judgment, it will not be possible because of the confidential character of this last one. So, in
case of posterior dispute with another co contracting party, the company cannot base itself on
the previous case law established by this decision as it would have made it with a judgment.
The success of the arbitration with companies can be explained by its speed (some
months are enough for obtaining a judgment, while several years are often necessary to reach
in front of the state jurisdictions a binding decision), its discretion which allows to maintain
the secret of the business, the free choice of the judges and the possibility of cutting itself
from legal rules to end in a fair solution. Certainly, the arbitration is an expensive procedure,
because it is necessary to pay the judges, and dangerous, because private judges do not still
present guarantees of independence of magistrates' body civil servants. Nevertheless, these
inconveniences were not enough to hinder its dynamism. It is true that the finances of
companies allow them to finance a justice better adapted to their needs and that the case law
watches that the arbitrators are enough independent with regard to the parts. The development
of the arbitration explains, finally, by the liberal character of the French rule, both as regards
the arbitration and the effects of this procedure.