Originially from: World Arbitration and Mediation Review (WAMR)

Institutional vs Ad Hoc Arbitration
The Practical Advantages of Administered Arbitration
By Robert Coulson, President, American Arbitration Association.
Two major developments have propelled the use of international commercial
arbitration in recent years: the adoption of the New York Convention on the
Enforcement of Arbitral Awards, and the dramatic shift towards a global, market
driven economy. These trends have increased the volume of transnational
business contracts containing arbitration clauses and have brought people into
arbitration who have not had prior experience with the process. It is timely to
describe the advantages of institutional arbitration, so that parties will not be
drawn into needless court litigation.
Time to Take Stock of UNCITRAL Rules
It has been sixteen years since the General Assembly of the United Nations
adopted “rules for ad hoc arbitration,” the UNCITRAL Arbitration Rules. Since
then, arbitration agencies have been established in many countries to serve the
needs of the international business community. Many of these institutions
maintain cooperative relationships with similar agencies in other countries. Most
are members of the International Federation of Commercial Arbitration
Institutions. They provide administrative services under a variety of arbitration
rules, some of them based upon the UNCITRAL model.
The creative work of those who produced the UNCITRAL Rules was most
praiseworthy. At a time when developing countries were suspicious of Western
international institutions, they created a system of ad hoc arbitration. Now, it is
timely to analyze some of the potential problems in using such a system, so that
lawyers can advise their clients how to select an appropriate arbitral forum for
their international disputes.
Ad Hoc Rules Not Self-Enforcing
The major problem with ad hoc procedures is that they are not self enforcing. If
a respondent refuses to arbitrate, a claimant must go to court — exactly what the
parties were seeking to avoid.
Under the 1976 UNCITRAL Rules, the notice of arbitration is delivered
directly to the other party, not to an administrative agency, eliminating the
likelihood that an agency will be available to assist the parties in the early stages