Dispute Resolution in Malta: Choosing Between Arbitration and Court Proceedings

Beneath the framework of Malta's judicial system, a distinctive mix of civil law, common law traditions, and EU directives and regulations, there are several avenues for dispute resolution. This article provides a comprehensive exploration of the two primary routes: litigation in Malta and arbitration in Malta, offering a detailed comparative analysis beneficial for any individual holding property in Malta or businesses operating under Maltese jurisdiction.

Understanding Litigation and Arbitration in Malta

Malta's Courts of Justice are divided into Superior and Inferior courts, with Judges sitting in the Superior Courts and Magistrates in the Inferior Courts. These courts handle all forms of legal disputes, from constitutional matters to criminal and civil cases. On the other hand, arbitration, established by the Malta Arbitration Act, provides an alternative method for dispute resolution, operating under the auspices of the Malta Arbitration Centre (MAC).

Arbitration in Malta

Arbitration in Malta serves as a widely accepted and frequently employed method of dispute resolution, particularly in commercial conflicts, both general and sector-specific. Specific sectors, like construction, maritime, and information technology, particularly favour this approach. Arbitration clauses are becoming increasingly commonplace across a myriad of industries. They are particularly prominent in commercial contracts guided by Maltese law or those involving a Malta-based entity, signalling a steady growth in the choice of Malta for arbitration.

Advantages:

• A time-efficient alternative to litigation in Malta.
• Monetarily beneficial and provides greater confidentiality.
• The MAC actively promotes domestic and international commercial arbitration.
• In international contracts, the involved parties can specify the applicable law, offering flexibility and control over the arbitration process.
• Malta's jurisdiction generally supports arbitration, with the courts holding extensive supportive powers (including interim relief) for both domestic and international arbitrations seated in Malta.

Disadvantages:

• Decisions are binding with limited opportunities for appeal.
• Absence of formal evidence rules might introduce unfairness.
• An arbitration in Malta will be invalidated if not conducted under the MAC, leading to 'institutionalisation' of the arbitral process.
• Being a small country, finding an arbitrator in Malta who can maintain independence and impartiality can be challenging.

Court Proceedings in Malta

Court litigation remains the predominant method of dispute resolution in Malta amongst local market players. Although costs for court proceedings in Malta are generally low, arbitration is becoming increasingly popular in domestic disputes, that being said, it has not yet surpassed court litigation as the most common method of dispute resolution.

Advantages:

• Decisions have the potential for appeal, facilitating an opportunity for reassessment.
• The public scrutiny associated with court proceedings can foster fairer outcomes.
• Judges and magistrates do not maintain a private practice, ensuring impartiality.

Disadvantages:

• Court proceedings may be time-consuming.
• Lack the confidentiality offered by arbitration.
• Judges are allocated rather than selected by the parties, which may not align with the litigants' best interests.

Choosing Malta for Arbitration: Contractual Considerations

When it comes to contract drafting, businesses need to pay careful attention to the chosen forum for dispute resolution. Arbitration, due to its expedient and confidential nature, often becomes the go-to recourse in international contracts. However, in Malta, arbitration is mandated in specific situations, such as minor traffic accidents and condominium disputes. This approach is designed to expedite dispute resolution without resorting to the Courts, providing a cost and time-effective solution.

Conclusion

Whether to opt for arbitration or court proceedings is a significant decision for businesses or individuals in Malta. Each method has its advantages and disadvantages, and the choice depends on various factors, including the nature of the dispute, the need for confidentiality, and the desire for control over the process.

In conclusion, the choice between arbitration and court proceedings in Malta is a complex one, influenced by a variety of factors. It is crucial for individuals to understand the implications of this choice and to seek advice when drafting contracts. This will ensure that they are well-prepared to navigate any potential disputes in the most effective and efficient manner possible.