Arbitration process

Dispute settlement clauses (e.g. arbitration agreements) are regularly (co-)negotiated when contracts are concluded. It is impossible to know in advance which disputes will arise from contractual relationships. The agreed dispute resolution mechanism is not always the most appropriate for the dispute that has actually arisen. It may therefore be useful to consider alternatives before initiating the agreed procedure. If the contract contains an agreement to conduct a DIS arbitration, it is possible to conduct a dispute management proceeding before filing the request for arbitration. Dispute management proceedings are designed to help the parties to select the dispute resolution m echanism best suited to resolve their dispute.

The party wishing to commence arbitration proceeding submits a request for arbitration to the DIS in writing pursuant to the DIS Arbitration Rules. The commencement of the proceedings normally interrupts the statute of limitations. A prerequisite for arbitration proceedings is a valid agreement (arbitration agreement) between the concerned parties. The arbitration agreement can form part of a contract or be agreed upon by the parties only once the dispute arises (however, this is rarely successful in practice). In contrast to state court proceedings, the parties can jointly decide fundamental elements of their arbitration proceedings, such as the language of the proceedings or the number of arbitrators.

The respondent provides its position on the request for arbitration in the answer and may also submit a counterclaim.

For each arbitration, a new arbitral tribunal is formed. The constitution of the arbitral tribunal is an important part of the arbitration. An arbitral tribunal usually consists of three arbitrators. In such a case, the parties can each select one arbitrator and the two arbitrators nominated by the parties select a further person as the presiding arbitrator. The possibility to select the arbitrators strengthens the parties confidence in the decision-making body and helps to ensure that the decision-makers have the necessary expertise and industry knowledge to resolve the dispute. In the case of a sole arbitrator, the parties can agree on one person as arbitrator, although in practice this is not always possible. An important function of the DIS as an administrative arbitration body is to monitor the independence and impartiality of the arbitrators selected by the parties.

Once the arbitral tribunal has been fully constituted, the DIS informs the parties that the conduct of the proceedings is transferred from the DIS to the arbitral tribunal. From this point on, the DIS continues to provide the rules of procedure and an institutional framework (e.g. escrow accounts for deposits). Until the submission of the arbitral award, the DIS has solely a supporting, monitoring function and does not have a shaping, leading role. The arbitral tribunal is responsible for the conduct of the proceedings from the point in time when the DIS informs the parties.

Unlike in state court proceedings, the parties and the arbitral tribunal can structure the arbitration proceedings flexibly and can tailor them to the needs of the individual case. The DIS Arbitration Rules, unlike the German Code of Civil Procedure, provide merely a framework from which the parties may also deviate. However, there is a fundamental rule that must be observed at all times: the parties must be treated equally and each party must have the right to be heard. If the parties do not agree on individual points, then either the corresponding rule already contained in the DIS Arbitration Rules applies or the arbitral tribunal determines the procedure at its own discretion after hearing the parties. An essential instrument for the structuring of the proceedings is continuous case management in the form of case management conferences (see next text).

A core provision of the DIS Arbitration Rules is Article 27, which enshrines the idea of the efficient conduct of proceedings. Pursuant to this provision, among others, a continuous management of proceedings is guaranteed by way of an early case management conference (21 days after the proceedings have been transferred to the arbitral tribunal) and, if necessary, by further case management conferences. During the case management conference, the arbitral tribunal discusses with the parties the specific procedural rules to be applied in the proceedings. The main focus is on the efficient conduct of the proceedings. Not only the arbitral tribunal, but also the parties themselves should participate in the case management conference, since important decisions will be taken which can significantly affect the duration and costs of the proceedings.

The arbitral tribunal conducts an oral hearing, including taking of evidence if required. Parties may agree not to hold an oral hearing.

Once the arbitral tribunal considers the dispute is ripe for decision, it declares the proceedings closed. This happens after the hearing or after the last admitted written submission. Subsequently, the arbitral tribunal will hold deliberations regarding the decision on the dispute and then issue the award. With the closing of the proceedings, the DIS Case Management Team starts the disbursements and reimbursement of the deposits paid by the parties.

Arbitration is a privately agreed competence over the resolution of a dispute. Arbitral tribunals are mandated to render a legally binding and final decision to the exclusion of the jurisdiction of the state courts. The decision of an arbitral tribunal is called an arbitral award. Arbitral awards are equally legally binding as judgments of state courts and can be legally enforced (enforcement). Only in exceptional cases, e.g. in case of a serious procedural error, can an arbitral award be set aside. An arbitral award therefore corresponds to the judgment of the last instance in a state court (final judgement). However, unlike in the state courts, arbitration does not have an appeals mechanism. An international agreement ensures the facilitation of enforcement of arbitral awards globally (over 160 member states: http://www.newyorkconvention.org/list+of+contracting+states). However, the arbitral award becomes effective only once transmitted in original form to the parties. This transmission is carried out by the DIS.