Furthermore, establishing procedural rules in ad hoc arbitration may be challenging. If the parties fail or are unable to agree on the procedure, the default rules of the arbitral seat are always available. Those rules are often quite generic. As a result, the arbitral tribunal will play a major role in deciding procedural issues, making the arbitration rather unpredictable. Therefore, parties need to ensure that they appoint arbitrators who have a good understanding of the arbitral process. What benefits can ad hoc arbitration offer to participants? a. Flexibility – One significant advantage of ad hoc arbitration is its flexibility. The parties will mutually determine the rules that will govern their arbitration proceedings. b. More responsibility with the arbitrator – Appointed by the parties themselves, more power is given to the arbitrator to organise and administer the arbitration (a role that would, in institutional arbitration, be managed by the institution). c. Cost-effective – Another important advantage of ad hoc arbitrations is that the parties will only have to assume the fees of the arbitrator and their attorneys. The fees that would normally go to the arbitration institution will be saved by the parties. This can also turn out to be cost-effective for small value claims since institutions have a minimum fee that they normally charge per case. What potential drawbacks should be taken into account? a. The tribunal is required to frame detailed guidance on all issues. Given that there are no institutional rules to guide the process, the arbitral tribunal will need to issue guidance on several key issues. b. Approaching the courts might be necessary. In the event that a party refuses to cooperate with the arbitration process (by refusing to appoint its nominee arbitrator or agree on the sole arbitrator, for example), recourse to courts becomes necessary. In an institutional arbitration, the institution carries out this function. c. Awards can lack credibility. Institutions THOUGHT LEADER 97 Ad hoc arbitration strongly depends on the parties’ willingness to co-operate.
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