Seven basic principles that explain each rule of arbitration
-
Are you applying to arbitration for the first time? Do you want to understand the logic of the process and why some issues are allowed and others are not?
-
Did you know that arbitration is a private institution with special powers—and how does this affect your rights as a party?
-
Why is an arbitration court decision final and not subject to appeal on the merits—and how does the law justify this?
An entrepreneur who is participating in arbitration for the first time often wonders: Why so quickly? Why can’t I appeal? Why doesn’t the court subpoena witnesses on its own initiative? Why do the parties choose their own judge?
The answer to all these questions lies in the principles on which the arbitration court is built.
Principle one: autonomy of the parties
The parties themselves determine the rules of the game. They choose the arbitration tribunal, the language of the proceedings, the applicable law, the venue, and the type of proceedings—written or oral. In a state court, all of this is determined by law.
Why it’s important: Flexibility allows you to tailor the process to your specific dispute and save time and money.
Principle two: contractual nature
An arbitration court hears a case only because the parties have agreed to do so in advance. Without an arbitration agreement, it has no jurisdiction. This is a fundamental difference from a state court, which is obligated to hear any claim based on its jurisdiction.
Why this is important: This explains why the arbitration clause in the contract is so important – without it, the mechanism does not work.
Principle three: equality of the parties
Both parties have equal procedural rights: the right to present evidence, the right to review materials, and the right to express their position. The court cannot accept evidence from one party without notifying the other.
Why this matters: Violation of the principle of equality is one of the few grounds for challenging a decision in a state court.
Principle Four: Confidentiality
All hearings are closed. Case information is not published. Third parties will not learn about the dispute unless the parties disclose it themselves. In a state court, everything is public and accessible through registers.
Why it’s important: Confidentiality protects the business reputation of both parties and trade secrets.
Principle five: finality of the decision
The arbitral tribunal’s decision is final and cannot be appealed on the merits. The defendant cannot appeal on the grounds that the court “misjudged the evidence.” The only grounds for appeal are procedural violations within a strictly limited timeframe.
Why this is important: It ensures predictability and speed. The plaintiff knows the decision will be enforced without the risk of years of appeals.
Principle six: voluntary execution
The ideal situation is when the parties voluntarily comply with the arbitration award. In practice, a significant portion of debtors pay after receiving the award—precisely because they know it is final and the next step is a writ of execution.
Enforcement: If the debtor fails to pay, the creditor applies to the state court for a writ of execution. The state court does not review the case, but only reviews the procedural aspects.
Principle Seven: Neutrality
The arbitrator must have no personal interest in the outcome of the case and must not be affiliated with any of the parties. If such a connection is discovered, the party has the right to challenge the arbitrator.
The Riga Arbitration Court employs practicing lawyers with experience in commercial disputes. Specialization in the specific area of law relevant to the dispute provides an additional advantage over a general jurisdiction judge.
Why is this important to know?
Understanding the principles helps you use arbitration correctly. If you know the decision is final, make sure your position is presented as fully as possible the first time. If you understand the autonomy of the parties, use it when drafting the arbitration clause.
Arbitration is a tool created by the parties for themselves. Those who understand it best use it best.
This article is for informational purposes only and does not constitute legal advice.