Arbitration Knowhow from James Clanchy FCIArb. London based arbitrator in independent practice

Arbitration Knowhow article

Ad hoc v institutional arbitration

Ad hoc versus institutional arbitration

Arbitration where a contract does not specify an administering institution is known as an ad hoc arbitration and is the preferred option in certain sectors.

Find more articles on related arbitration topics on my Arbitration Knowhow page.

Ad hoc versus institutional arbitration

An arbitration clause in a contract may provide for arbitration in London without specifying an institution to administer the proceedings.  If so, this will be an “ad hoc” arbitration, which will be conducted under the Arbitration Act 1996 with the Commercial Court in a supporting role. See my blog post, Ad hoc arbitration: a quiet majority.

It is open to the parties to an ad hoc arbitration to agree on a set of procedural rules to govern their arbitration.  

Ad hoc arbitrations arising from disputes in the shipping industry will often be submitted to arbitrators in London who accept appointments on the London Maritime Arbitrators Association (LMAA) Terms.  I am an Aspiring Full Member of the LMAA and will accept appointments on its Terms: http://www.lmaa.london/membership-details.aspx?id=2404.

Parties may also choose an institution as an “appointing authority” whether pursuant to the UNCITRAL Arbitration Rules or otherwise.  It is then the institution, not the courts, which could:

  • appoint an arbitrator in default of an appointment by a party
  • deal with challenges to arbitrators
  • act as a fund-holder for advances on the arbitrators’ fees
  • carry out any other particular functions which the parties might agree to submit to it.

In London, the LCIA (see below) is frequently appointed to carry out such functions in ad hoc arbitrations, sometimes on the recommendation of an arbitral tribunal after it has been appointed: www.lcia.org/Dispute_Resolution_Services/LCIA_Services_in_adhoc_proceedings.aspx  

Having served as Registrar of the LCIA for four years, I am familiar with the services it provides to parties in ad hoc arbitrations.

An arbitration clause may, instead, provide that the parties’ dispute will be submitted to an institution for determination under its own rules.  In addition to all of the functions of an appointing authority listed above, the institution should:

  • ‍have its own set of procedural rules and default timetables
  • supervise the smooth running of the proceedings
  • fix the arbitrators’ fees
  • monitor the tribunal’s budget and provide updates on fees and charges to the parties
  • raise queries with the tribunal, eg about the timing of an award, in a neutral manner
  • proofread the award and provide certified copies.

Users of institutional arbitration are sometimes unaware of the extent to which ad hoc arbitration is preferred in certain sectors, such as shipping.  See my blog post on silos in arbitration: blogs.lexisnexis.co.uk/dr/the-silo-effect-in-arbitration/

The numbers of cases dealt with in ad hoc arbitration tend to be ignored in surveys. See my Lexis Blog posts arbitration statistics and alternative facts and Arbitration statistics: a reality check.

Commercial parties deserve choice. It is essential that ad hoc and institutional arbitration be allowed to thrive and develop alongside each other. Regrettably, ad hoc arbitration finds itself increasingly under attack by governments, university law schools, the media, and others. Unjustified claims are made for institutions' superiority and thought leadership. See my ICMA XXI paper, Ad hoc arbitration and its enemies, in which I called for the international commercial arbitration community to demonstrate solidarity and ensure that the voice of ad hoc arbitration was heard.

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