Nikos Papaefstathiou is his book characterizes arbitration as “the private way” of dispute resolution: “Arbitration is the contractually selected binding adjudication of a certain dispute by a private judge instead of regular courts”. Arbitration may begin either by agreement before the dispute arises or by agreement after the dispute has arisen. Institutional is the arbitration where the arbitration clause refers to a specialized Center that intervenes and assumes a management role of the process while Ad Hoc Arbitration is the arbitration where the parties have not chosen a Center to refer their dispute but the parties themselves agree all the matters relating to arbitration.
According to Nikos Papaefstathiou’s book, Commercial Arbitration in Cyprus, arbitration is characterized as “the private way” of dispute resolution:
“Arbitration is therefore the contractually selected binding resolution of a certain dispute by a private judge instead of the regular courts”
Arbitration may commence either by agreement before the dispute has arisen or by agreement after the dispute has arisen. There is still the possibility that arbitration may be ordered by the Court in accordance with the Civil Procedure Rules when the parties so agree.
The differences between institutional and ad hoc arbitration and the advantages and disadvantages of each procedure are analyzed below.
Institutional is the arbitration where the arbitration clause refers to a specialized Center that intervenes and assumes a case handling role in the process. There are various arbitration centers worldwide, such as the International Chamber of Commerce, the London Court of International Arbitration, but also local once such as the Center for Arbitration and Mediation of the Cyprus Bar Association or the Cyprus Center for ADR.
Institutional arbitration has several advantages including the fact that there are comprehensive rules that largely cover any issues that the parties may not have considered. Also, and since the Center assumes a case handling role, the arbitrator is relieved of the obligation to undertake administrative or clerical work. The disadvantages of institutional arbitration are that there may be a delay due to the detailed rules that apply as well as the fact that such a procedure may be costly since the Center charges case handling fees. (see N. Papavestathiou, Commercial Arbitration in Cyprus, pp. 97-98)
Ad Hoc Arbitration
Ad Hoc Arbitration is the arbitration where the parties have not selected a Center to refer their dispute but the parties themselves agree on all matters relating to the arbitration, such as the selection of arbitrators, the selection or formulation of the arbitration rules, the law that will apply to resolve the dispute, as well as the administrative support for the arbitration. Such is the case for example where the parties agree that “In the event of a dispute, the parties will select a mediator for the purpose of resolving it“.
Amongst the main advantages of ad hoc arbitration is the fact that the process is flexible since the parties decide on the rules to follow and their arbitrator. That is, the parties by their own agreement can shape the rules by which the dispute will be resolved so as to deal with the issue at hand. The costs are generally lower than those of institutional arbitration and can be negotiated by the parties – unlike the case of institutional arbitration. Some of the disadvantages of ad hoc arbitration are that rules which have not been a matter of consideration before the courts may “deny the parties the benefit of being guided by judicial interpretation“. Also, the fact that there are no comprehensive rules at play may result in a delay in the whole process. (see N. Papavestathiou, Commercial Arbitration in Cyprus, pp. 97-98)