WHAT IS ARBITRATION?
Arbitration is an alternative system, different from the procedure followed in the normal courts, designed to resolve disputes between individuals in which an impartial third party, the arbitrator, solves the controversy by means of a final award. The award is equivalent to a final judgment.
The parties can agree for the arbitration to be governed by rules of law or equity, for which they must decide in advance what kind of arbitration would best address the issues in the particular conflict they wish to solve. The type of arbitration chosen does not affect the procedure, but does affect the way the arbitrator considers issues and finally resolved the dispute. Failing agreement by the parties on the type of arbitration, the relevant legislation provides that arbitration in law shall prevail.
TYPES OF ARBITRATION
Failing agreement by the parties on the type of arbitration, the relevant legislation provides that arbitration in law shall prevail.
Arbitration in law requires arbitrators to resolve conflicts through legally reasoned decisions, strictly applying the legal rules applicable in any particular case to its conclusion. Arbitration in law awards must be well founded in law.
This is the type of arbitration applied by default, i.e. in the absence of express agreement otherwise by the parties in conflict. It is ideal for resolving disputes over interpretation of contractual clauses and all other disputes involving matters governed by rules of law.
Equity is taken to mean "rightness", and refers to a "natural sense of justice." Arbitration in equity requires arbitrators to resolve disputes through awards issued on the basis of their knowledge and honest belief in accordance with their natural sense of justice. This type of arbitration gives more leeway to arbitrators, as they can take into account circumstances that allow them to moderate the strict application of rules of law in search of the most just solution for any specific case. This does not mean that arbitration decisions ("awards") can be issued arbitrarily and without reference to the legal system or any contracts involved, or that awards are made without sound reasoning to found decisions.
Arbitration in equity is suitable for resolving disputes involving claims for damages, certain conflicts in the construction sector, succession, etc.