When to choose arbitration instead of costly litigation?

In addition to courts, there are also several arbitration tribunals in Estonia, where it is possible to resolve various disputes between the parties. When and why should someone decide in favor of arbitration instead of litigation?

Judicial proceedings vs. arbitration proceedings

A precondition for resolving a dispute in arbitration proceedings is an agreement between the parties. This is in contrast to court proceedings, where no agreement is required to resolve the dispute and the dispute is resolved on the basis of law. In the absence of an agreement, it is not possible to settle a dispute in arbitration.

In the case of consumer disputes, it should be noted that arbitration is only possible if an agreement is reached after the claim has arisen. When concluding an agreement with the consumer, the consumer must also be informed of the differences and principles of court and arbitration proceedings. Thus, the settlement of consumer disputes in the arbitration is significantly more limited than in the case of issues arising in the course of economic activity.

In addition to the fact that arbitration requires an agreement between the parties, not all disputes can be subject to arbitration. It is prohibited to settle by way of arbitration disputes arising from the lease agreement, disputes concerning the termination of the employment contract, and disputes concerning consumer credit agreements. Criminal cases cannot be settled by arbitration tribulations either, as the state has a monopoly for prosecution.

Advantages of arbitration

The advantage of arbitration over litigation is speed: although Estonian court proceedings are one of the fastest in Europe, it is possible to resolve cases even faster in arbitration proceedings. As decisions of arbitration tribunals cannot be appealed and the grounds for challenging them in court are limited, the choice of arbitration allows the dispute to be settled more quickly.

However, the decision in favor of arbitration should not be based solely on the presumption that arbitration is quicker than litigation.

Another advantage of arbitration proceedings is confidentiality – court decisions that have entered into force are available to everyone online. However, arbitration decisions are confidential and no one except the parties involved is aware of their content and cannot become aware of it in any way. Therefore, if the objective is to keep the settlement of the dispute between the parties only, it is reasonable to opt for arbitration.

Arbitration also differs from litigation in that the parties have the power to influence the composition of the court. If the rules of internal organization and randomness determine which judge will decide a case in court, then the parties to the arbitration proceedings can choose the arbitral tribunal according to the agreement.

The selection of arbitrators will ensure that the matter is settled by experts in their field and, although the arbitrators must be independent, the parties will nevertheless select an arbitrator who they consider will make a decision in the best interests of that party.

Not all arbitral tribunals are equal

The difference between arbitration and litigation also lies in the enforceability of the decision. If following the entry into force of a court judgment, a bailiff can be approached immediately and enforcement proceedings can be requested, then this is not the case for most arbitral tribunals.

In Estonia, only the decisions of the Arbitration Court of the Estonian Chamber of Commerce and the arbitration court of the Chamber of Notaries are directly enforceable; in the case of other arbitral tribunals, the court must first be approached. It is also necessary to take legal action if you want to enforce a decision of arbitral tribunal made abroad.

The procedure for recognition and declaration of enforceability of decisions of arbitral tribunals in court is not, as a rule, lengthy, but may nevertheless jeopardize the reality of what has been achieved in the arbitral tribunal.

In conclusion, arbitration is a good alternative to litigation to be considered doing business, especially if the disputes that may arise in the future are very specific and require expertise and the aim is to stay out of the public eye.

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Hedman

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