The pros of arbitration

The Malta Arbitration Centre was instituted as a healthy alternative to settling disputes within the court system, which, as anyone who has been involved in the system knows, can be painfully time-consuming while discretion is not often provided for. David Lindsay speaks to MAC Registrar Godfrey De Marco on how the Centre tackles these issues.

How did the concept of arbitration come about and how did you become involved in the Malta Arbitration Centre?

Arbitration as such is not really new to Maltese law. It has been on the statute books from as far back as 1934, but it was only conducted under the provisions of the Code of Organisations and Civil Procedure. That made the system very cumbersome and unwieldy and accordingly very few people resorted to it.

It was considered necessary to find an alternative to the courts system and the arbitration system was brought to mind.

We had a new law in 1996, which did away with all the unsatisfactory elements of the old law and I think, in the end, it turned out to be a modern piece of legislation that took the requirements and needs of modern society into consideration.

It must be added that this Act was passed with the consent of both parties on Parliament and the Centre accordingly enjoys the support of both.

My involvement came about while I was permanent secretary within the Ministry of Justice. I had seen its origins, as the law was passed in 1996 and, later on in 1998, when the board was appointed by the Labour government I began servicing the board over and above my other duties. It was very interesting, as we had built something up completely from scratch.

What were the cumbersome aspects of the old legislation?

As the former legislation was conducted under the provisions of the Code of Organisations and Civil Procedure, the procedures of the court went into the system so that made it merely another court system.

It is now a process that is both quicker and more cost-effective and it also has certain advantages built into it. For example, there is the question of expeditiousness. Since bureaucracy of any sort is very limited, cases are bound to be heard and decided upon more quickly.

Then there is the question of confidentiality. There is an absolute, strict confidentiality in the whole process and at all stages of the procedures. The Centre cannot divulge any information about what is taking place with the parties involved in arbitration, unless the parties concerned give us their explicit permission to do so.

There is also an advantage in the selection of the arbitrator, who can be chosen with the agreement of both parties. They can agree on a person, whoever he is or whatever his profession. This person can be anyone at all, so long as both parties have faith and confidence in his abilities and they agree to his participation, he would be appointed arbitrator of the case.

Finally, there is the question of the award. In the meantime, before it is registered, the parties have 15 days in which to accept the award. Within these 15 days, any of the parties can ask the tribunal for an interpretation of the award, in case they believe that it is unclear. They can ask for a correction of the award, in terms of erroneous computation or printing errors, and they may even ask for an additional award if they feel that a certain claim has not been properly addressed or has been completely omitted.

The tribunal can look into all this, they decide upon it and they register the award. All these advantages are built into the system.

How has the Maltese mentality come around to the concept of arbitration?

Let us say that that is one of our main targets. We are looking into ways of launching a publicity and promotional campaign in an effort to promote a better understanding of the system, its benefits and to try it out.

Some think that there are only the courts for the settlement of disputes. This is, however, an alternative method for settlement outside the courts and one which is equally binding.

The Centre is especially adapted for technical issues, such as those that crop up in the building and construction sector. The arbitrator can be an architect or a civil engineer and the need to call in technical experts would not be quite so high. That is one step removed from the courts, in which the judge would have to rely on the recommendation of experts.

How does the Centre proceed if the parties fail to find or agree upon a suitable arbitrator for a case?

In this case, the Centre would step in and the chairman appoints one himself and his decision is final and binding.

The majority of cases at the moment are linked to the building and construction industry.

However, while the Centre caters for virtually any type of dispute, the law specifically precludes its use for questions of personal civil status including separation and annulment of marriages.

All parties involved must first have an arbitration agreement. No one can bring someone else into an arbitration proceeding against his will ø there has to be consent, in writing, by both parties.

The parties must have either entered into an agreement prior to the dispute, such as when a contract is drawn up, there would be an arbitration clause specifying that in case of a dispute the matter would be referred to arbitration.

But it can also be a form of agreement after the dispute has arisen. For example, a house is being built and some differences have cropped up regarding the price or quality of work and the parties agree to enter into an arbitration agreement.

Therefore, the agreement can take place either before or after the dispute occurs, but there must be a written agreement at some point.

This type of settlement must be very beneficial to the business community, what type of interest has emerged from the sphere?

It is. In fact, all the summer we have been having briefing sessions with some 150 to 200 lawyers to whom we explained the basic elements of the law and what the process is all about.

We also carried out the same exercise with legal procurators, notaries, architects and engineers. Additionally, we had a very successful session with accountants, which is another profession that we believe can help us to promote arbitration to their clients.

The feedback from these sessions was very positive and encouraging.

Once there is a dispute, how long does it take for it to be settled through the Centre?

That always depends on the dispute at hand. There is no time limit or number of sittings to a case but we do insist that, when a case comes in, we ask the arbitrator to set a timetable for the conduct of the process. Some time is given to present a statement of claim, while some more is given for a statement of defence. We ask them to be reasonable and not to drag it out.

The process is very flexible and convenient. For example, meetings can take place here at the Centre or at the arbitratorís office or home ø wherever they like and agree upon. Accordingly there is a relaxed environment and the process is very flexible and smooth.

The arbitrator also has great flexibility in adopting his own ways in dealing with the case. Of course there are strict parameters within which he has to work. However, within those parameters, he is completely at liberty to conduct the case in his own way.

The Centre provides the facilities, ensures that the process is running smoothly and provides assistance if the need arises.

The whole system has been built to ensure that the process carries on smoothly without any hiccups and without any of the tricks that some people resort to when they believe things are not going their way.

What type of external agreements has the Centre reached?

We recently entered into an agreement with the Malta Insurance Association, whereby the Association will encourage its members to refer any disputes between them to arbitration. The initiative was very well received by the member companies in the Association.

We are also in the process of setting up a similar agreement with the overseas betting companies located in Malta. They were thinking of referring any disputes between punters and the companies to an international arbitration centre and I believe that we can fit the bill. We are drafting and negotiating an agreement along the same lines that we have done with the MIA.