If there is one thing that non-specialists in the field of arbitration seem to be sure about, that is that arbitration is an optional mechanism, to be used if so desired by the parties which make appropriate legal arrangements (usually arbitration agreement) for its use within a given legal framework. But this is not always the case.

Although this is not common, arbitration can be mandated by law as the mechanism to resolve disputes arising out of a particular act of legislation and/or a particular legal situation. Why and how this occurs are interesting questions that can shed light on the potential for a broader use of this technique.

A recent and prominent example of mandatory (or compulsory) arbitration and one that can also be of comparative interest to other jurisdictions such as Serbia is the use of arbitration to resolve disputes arising out of commercial rental agreements during the Covid-19 pandemic. After a series of measures during the lockdowns and the pandemic, the UK Parliament in March 2022 adopted the Commercial Rent (Coronavirus) Act 2022, with an explicit goal of ‘enabling relief from payment of certain rent debts under business tenancies adversely affected by coronavirus to be available through arbitration’ (Introductory Text of the Act). Although the relief measures are themselves interesting from the viewpoint of contract law, the focus here is on the use of arbitration to resolve all disputes where the landlord and commercial tenant cannot come to the agreement about unpaid rents accumulated during the pandemic measures.

Two key aspects stand out. One is that there is limited explanation as to why exactly arbitration is put forward as a preferred mechanism for these disputes, and the second one is that ‘arbitration’ is here a considerably modified dispute settlement mechanism from its usual meaning and therefore a rather hybrid adjudication/arbitration one. On the first point, the Act itself is completely silent on as to why arbitration is chosen, but some limited insight is offered by the Explanatory Notes accompanying the Act. According to these, after a public Call for Evidence in April 2021, preferred option to manage the exit from the Coronavirus measures regime was the introduction of arbitration, showing a degree of trust of commercial entities in the mechanism (paras 7-9). In the vein, Explanatory Notes suggest that arbitration offer an ‘effective, streamlined process, compatible with the rights of the parties to a fair process.’ (para 13)

In terms of the arbitration process itself, while it builds upon the English Arbitration Act 1996, arbitration under the Act is a somewhat sui generis mechanism as arbitral institutions must have separate lists of arbitrators for it, with separately specified grounds for removal and other connected issues (section 8 of the Act); special provisions on the deadlines and ways in which the arbitration procedure is initiated (sections 9 and 10); clearly delineated content of the submissions and written statements (sections 11 and 12); considerably strict rules about what and how arbitrators can decide in their awards, as well as on their publication (sections 13-18); and fees, expenses and availability of oral hearings (sections 19-20). Taken together, these provisions create a much more regulated process than is usual under the Arbitration Act 1996 and most arbitration rules, limiting the discretion of the parties in a number of important ways.

From a practical viewpoint, the choice of arbitration may have distinct advantages as commercial parties seem to prefer it and it can limit the pressure of (already burdened) state courts. One question, of course, remains the issue of fees – if there is a significant discrepancy to court fees, it would appear as if a state is outsourcing its provision of justice at the expense of entities involved, which might raise questions concerning access to justice. But it is also worth pondering if a fairly heavily regulated arbitration – in terms of both the process and substance of decisions – is truly arbitration any more or a specific adjudication process that is also known in many laws, including England and Wales. Whether or not this is acceptable might depend on the assessment if the reputation of arbitration is being used to make the mechanism more legitimate/appealing than it would be otherwise, but such a determination would require careful assessment of provisions as well as the feedback from users themselves.

Taken as a whole, mandatory arbitration can thus serve valuable purposes, and the Commercial Rent (Coronavirus) Act 2022 so far seems to have been received well. But the devil, as always, remains in details and opting for mandatory arbitration needs to be carefully assessed from the viewpoints of access to justice, costs and broader legitimacy.

Velimir Zivkovic