Arbitration in law is a method of dispute resolution in which the parties decide to entrust the dispute to arbitrators rather than a court of law. More and more entrepreneurs are choosing this solution. The main reasons behind this decision are speed, flexibility, confidentiality, and a wider choice of arbitrators. It is often confused with mediation.
If you run a business or sign international contracts, it is worth knowing the rules of arbitration.
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What Is Arbitration in Law?
Arbitration in law is an alternative method of resolving disputes. Instead of going to a state court, the parties agree to let selected individuals – arbitrators – decide about the case. The arbitrators’ decision (called an arbitration award) is binding. Once recognised by a court, it can be enforced like any other court judgment.
In Poland, the legal basis for arbitration is set out in Articles 1154–1217 of the Code of Civil Procedure. At the international level, the key document governing the recognition of arbitral awards is the 1958 New York Convention.
There are two main types of arbitration:
- Ad hoc arbitration – conducted without the involvement of any institution. The parties set the rules themselves.
- Institutional arbitration – run by specialised institutions (such as SAKIG, ICC, LCIA, VIAC) according to established rules.
Moreover, arbitration can be:
- Domestic – where the dispute and tribunal are based in Poland.
- International – when at least one party is based abroad or the dispute is cross-border.
Arbitration is especially popular in certain sectors. For example: construction, infrastructure, energy, IT, foreign investment, and international trade.
International Arbitration vs. Common Court
Choosing arbitration over a common court can be a strategic business decision. Especially in international contracts. Arbitration offers a level of neutrality that national courts may not guarantee.
In practice, international arbitration helps avoid national bias and cultural differences. It offers a standardised procedure that is clear and acceptable to both parties.
Key Advantages of Arbitration over Court Proceedings:
- Neutrality and the ability to choose arbitrators independent from the state jurisdiction.
- Confidential proceedings – no public hearings, which helps protect a company’s reputation.
- Flexible procedures tailored to the nature of the dispute.
- Faster resolution – usually within 6 to 12 months.
- Global enforcement of awards – thanks to the New York Convention.
- Lower risk of long appeals – limited grounds for challenging the award.
It’s also worth noting that arbitration awards are often easier to enforce abroad than national court judgments.
Arbitration Clause – How to Protect Your Interests at the Contract Stage
To use arbitration, the parties must include an arbitration clause. It can be either a part of the main contract or a separate agreement. A well-drafted clause prevents disputes over which court or tribunal has jurisdiction.
Key elements of an effective arbitration clause:
- a clear statement that disputes will be resolved through arbitration,
- identification of the relevant arbitration institution (e.g. SAKIG, ICC, VIAC),
- the seat of arbitration (e.g. Warsaw, Vienna, Paris)
- the number of arbitrators and how they will be appointed,
- the language of the proceedings (often English).
Mediation vs. Arbitration – Key Differences
Arbitration and mediation are two distinct methods of resolving disputes. While both qualify as ADR (Alternative Dispute Resolution), they differ in purpose, process, and outcomes.
| Feature | Arbitration | Mediation |
| Decision | Binding award | Voluntary agreement |
| Role of the parties | Passive (dispute is handed to arbitrators) | Active (parties work out the solution themselves) |
| Outcome | Arbitral award | Mediation settlement |
| Enforcement | Yes – like a court judgment | Yes – after court approval |
| Cost | Higher | Lower |
| Duration | About 6–12 months | Short (up to a few weeks) |
Comparison of Arbitration and Mediation
In practice, mediation can be a step before arbitration. Some arbitration rules even require the parties to attempt mediation first.
Arbitration in Law – Summary
Arbitration is a professional and internationally recognised method of dispute resolution. It gives parties more control over the process. Moreover, it guarantees confidentiality and makes it easier to enforce an award abroad. However, to use it effectively, it’s important to include a proper arbitration clause early on. Remember to choose the right institution and prepare both in terms of procedure and evidence.
Find professional support from firm in arbitration matters. We have experience in commercial, investment, and construction disputes. Contact us today.
FAQ – Frequently Asked Questions About Arbitration in Law
1. What is arbitration in law?
It’s an alternative method of dispute resolution. The parties refer the case to an independent arbitral tribunal instead of going to court.
2. How is arbitration different from mediation?
Arbitration ends with a binding decision. Mediation leads to a voluntary agreement between the parties.
3. Is arbitration recognised abroad?
Yes, under the 1958 New York Convention, which is in force in over 170 countries.
4. How much does arbitration cost?
It depends on the institution and the value of the dispute. For example, ICC fees can range from a few to several hundred thousand euros.
5. How do I include an arbitration clause?
Ideally, in the main contract, together with indicating the relevant institution. Specify also the seat of arbitration, language, and number of arbitrators.
6. Is arbitration confidential?
Yes, confidentiality is one of its main advantages – proceedings are not public.
7. When is arbitration a better choice than court?
When you value confidentiality, faster proceedings, and easier enforcement of the award abroad.
8. Is arbitration suitable for all types of cases?
No – it cannot be used in matters like family law, criminal cases, or issues involving legal capacity.
9. How long does arbitration take?
Usually from a few months to one year – i.e. faster than court proceedings in many countries.
10. Can I choose the arbitrators myself?
Usually, you can. The parties agree on the method of appointment or follow the rules of the arbitration institution.