Breach of contract

I entered into a contract with a party that made an advance payment, and other interim payments, but then failed to pay the final installment, which is now overdue. After following up with them for many months, and without any response, this party has referred the matter to arbitration. I find it quite shocking that the party in default is referring this matter to arbitration, and not myself. What should I do? All I want is my money.
2 January 2012

It is very likely that your contract has an arbitration clause that allows disputes to be referred to arbitration. Arbitration is the determination of a dispute by one or more independent third parties (the arbitrators), rather than by a Court. The parties appoint these arbitrators in accordance with the terms of the agreement. The arbitrator is bound to apply the law accurately, and must conform to the rules of natural justice. Depending on the arbitration clause and the ‘fairness’ of the decision, the award made by an arbitrator can be challenged in Court. You have not mentioned if the contract you entered into includes an arbitration clause. If it does, you will have to go for arbitration. If there is no arbitration clause, then you need not arbitrate and you can file a recovery suit.

You are shocked that the defaulting party has referred this to arbitration. Normal arbitration clauses are worded such that, if a dispute arises, any of the affected parties can refer the matter to arbitration. You have not told us if a dispute has arisen, only that payment has not been made. Is this event a “dispute” that can be interpreted into the arbitration clause? We cannot answer that question, because we do not have all the details. What we can say for sure is that the defaulting party seems to think there is a dispute somewhere hence the withholding of their payment.
In the interest of time and, depending on the amounts involved, we suggest you proceed to arbitrate. Arbitration proceedings are fast and can be disposed of within a few weeks.