Alternative dispute resolutions for entrepreneurs: arbitration & binding opinion

As a business owner, sooner or later you will face disputes. A decision can be sought not only through the courts. It is also possible through alternative dispute resolution (AGB). AGB can be faster and more flexible than litigation in the state courts. As a business owner, you need efficient problem resolution, which is why AGB can be a godsend for you. In this article, I discuss two forms of AGB: arbitration and binding advice.

Arbitration

Arbitration is a form of private justice in which companies agree to submit their disputes to an arbitration tribunal. In this case, the judges handling the case are often called arbitrators and together they are called the arbitral tribunal. This is often done in a composition of one or three arbitrators who handle the conflict. This may possibly include an expert in the area the case is about and a secretary, who performs the role similar to a clerk.

The proceedings begin with written statements from both parties, followed by a hearing at which the parties can explain their positions orally. Following the arbitrators’ decision, a binding award is drafted and sent to both parties. This award is also filed with a designated state court. The parties are obliged to comply with the award. In case of non-compliance, the court may be asked to grant permission to proceed to enforcement measures. In principle, the party initiating the arbitration bears the costs, but it is almost always requested that the other party be ordered to pay the costs.

Binding Opinion

Binding opinion is another form of ABG where the parties agree to submit any disputes to an independent third party (binding advisor) and bind themselves to its outcome (the opinion). The advisor establishes procedural rules after which the parties submit their positions and relevant documents. The advisor may request additional information, consult third parties, and possibly an oral hearing takes place after which the binding advisor issues the opinion. Since the binding opinion is “only” given on the basis of an agreement and does not, for example, have its own extensive legal regulations, a party will have to claim compliance in the state court through a summons procedure if the other party does not comply with the opinion. Granting that claim will result in an enforceable judgment. Thus, if necessary, enforcement measures can be taken.

Differences between AGB and regular litigation

AGB and state court litigation differ in terms of appeal and transparency. With AGB, there are generally limited possibilities for appeal, leading to procedures that are completed more quickly. In court proceedings, the principle does allow for appeals to the trial court and possibly cassation to the Supreme Court. Also, some judgments are published on the website of the Judiciary and hearings are in principle public, which provides a certain degree of transparency. AGB is often confidential in nature.

Institutes for alternative dispute resolution

There are several institutes that business owners can turn to for AGB. The Netherlands Arbitration Institute (NAI) is one of the best-known organizations offering arbitration. There is also the Construction Arbitration Council, which focuses on construction-related disputes. Stichting Geschillenoplossing Organisatie en Automatisering (SGOA) also offers options for binding advice and other forms of dispute resolution. Based on the type of dispute, the most relevant institute is chosen by the parties. Often this is already stipulated in the arbitration clause in the contract in respect of which the dispute exists.

Advantages of AGB

There are several advantages of AGB over regular litigation. First, proceedings are often completed more quickly. In addition, parties can benefit from the expertise of arbitrators who specialize in their field. Another advantage is the flexibility of the process. Parties have more influence on the procedure, such as the choice of arbitrator/counsel and the rules that are followed. Unlike regular court proceedings, AGB is usually confidential; therefore, the outcome of disputes will not be published.

Disadvantages AGB

Yet there are also disadvantages to alternative dispute resolution. The costs can be higher than in the case of government litigation, especially if parties choose specialized arbitrators or extended procedures. In addition, there are generally limited appeal options unless the parties agree otherwise.

Incidentally, not all disputes may be fought through AGB. Only disputes over rights that are, as it is called, “at the free will of the parties. Thus, issues that are not, such as bankruptcy and annulment of a legal entity’s resolution, may not be litigated through AGB.

Conclusion

AGB offers entrepreneurs a flexible and often quicker alternative to government litigation in some cases. Both arbitration and binding advice can be effective ways to resolve conflicts, especially in complex or international cases.

Advice

It is important to carefully weigh the pros and cons and choose the method that best suits your specific situation as an entrepreneur. So be well informed about the possibilities. This is something we will be happy to advise you on.

Our specialized lawyers will be happy to assist you. Please contact one of our  attorneys by email, phone or fill out the contact form for a free initial consultation.  We are happy to think along with you