Arbitration costs 'much more' than litigation

The cost benefits of arbitration compared to litigation may be overstated, Lord Neuberger (pictured) has said.

Speaking to property arbitrators at the ARBRIX annual conference in London on Tuesday (12 November 2013), he suggested that arbitration costs may in fact be greater than those incurred in litigation.

"Cost was said to be [a] reason for preferring arbitration, but I doubt that: advocates, solicitors and experts cost the same, I would have thought, in court or in arbitrations, and you have to pay much more for your arbitrator and hearing room than you do by way of court fees," said the president of the Supreme Court.

He also said that arbitrators were disinclined to minimise costs because of the nature of their appointment.

"I suspect that judges are more concerned to keep costs down than are many arbitrators, as an arbitrator who is reputed to be critical of legal and other fees may find himself rather short of appointments."

He said that "concerns about judicial national bias or worse" are "an important reason" for preferring arbitration for international disputes, but that this should have limited application to property disputes in the UK.

Lord Neuberger appeared to take issue with the number of disputes going to arbitration instead of court, suggesting that the reasons given may not always be valid.

He said that many disputes went to arbitration "because it is assumed that they have to", such as for rent review and other contractual valuation issues.

Further, many disputes went to arbitration "because they are of a type which have always gone to arbitration", he said.

However, he added that, whatever the client's reason for choosing arbitration, arbitrators perform a "very important function".

"While, unlike judges, they are private appointees, they are like judges in that they have a duty to act judicially - and this very important duty is not merely owed to the parties to the arbitration, but it is also, I would suggest, owed to the public," he said.

Reflecting on the changes which have affected the legal sector since he became a judge in 1996, he said that "from the point of view of the professions, there has been an increase in regulation, much of it, I fear backside-protecting and box-ticking".

"At a time when the rule of law is becoming ever more important, our laws are getting ever more complex, and the cost of litigation is ever more expensive, it seems to me that the role of the Supreme Court is, more than ever, to lead the way in ensuring that the law is as principled, as practical and as simple as possible."