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Arbitration In International Trade Law

International arbitration is similar to domestic court litigation, but instead of taking place before a
domestic court it takes place before private adjudicators known as arbitrators. It is a consensual,
neutral, binding, private and enforceable means of international dispute resolution, which is typically
faster and less expensive than domestic court proceedings.

The use of international arbitration has evolved to allow parties from different legal, linguistic and
cultural backgrounds to resolve their disputes in a final and binding manner, typically without the
formalities of the procedural rules of their own legal systems.

International arbitration is sometimes called a hybrid form of international dispute resolution, since it
blends elements of civil law procedure and common law procedure, while allowing the parties a
significant opportunity to design the arbitral procedure under which their dispute will be resolved.
International arbitration can be used to resolve any dispute that is considered to be “arbitrable,” a
term whose scope varies from State-to-State, but which includes the majority of commercial disputes.

Companies frequently include international arbitration agreements in their commercial contracts

with other businesses, so that if a dispute arises with respect to the agreement they are obligated to
arbitrate rather than to pursue traditional court litigation. Arbitration may also be used by two parties
to resolve a dispute via what is known as a “submission agreement”, which is simply an arbitration
agreement that is signed after a dispute has already arisen.

The primary benefits of using international arbitration to resolve a dispute rather than traditional court
litigation include:

-International Arbitration can resolve disputes more swiftly than traditional court litigation since there
are only limited appeals from arbitration awards.

-International Arbitration can be less expensive than traditional court litigation.

-International Arbitration can provide better-quality justice, since many domestic courts are
overburdened, which does not always allow judges sufficient time to produce legal decisions of high
quality.

-Clients can play an active role in selecting an arbitrator who is an industry expert in International
Arbitration, rather than a generalist like many domestic court judges.

-International Arbitration is flexible, and the individual parties to a dispute play a significant role in
selecting the procedure that is most appropriate for resolving their international dispute, deciding on
whether to include procedures such as document production.

-International Arbitration can be confidential, which is useful if the parties wish to continue their
business relationship or to avoid negative publicity.

-International Arbitration is neutral. This is very important for cross-border transactions, since it avoids
the possibility of a “home court” advantage for one party.

-In certain countries, judges do not rule independently. In International Arbitration an award must be
independently made, or it cannot be enforced.
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-In certain cases, such as investor-State disputes, International Arbitration offers the sole remedy for
the violation of a legal right.

Commercial disputes that end in courts of law are always costly and usually bitter. Cases frequently
drag through the courts for many years, and the ultimate winner of the lawsuit finds that he is out of
pocket more than the amount of the judgment in his favor. Courts tend to favor their own nationals
and thereby further animosity is created between peoples of different countries who grow suspicious
of the kind of deal that they will get from foreign nationals.

There is no body of international commercial law, and the courts of different countries have
interpreted the rights and liabilities of buyers and sellers differently. Public attention resulting from
cases being aired in courts has frequently added to the friction between disputants and has thereby
created enough animosity to end business relationships.

An alternative method of settling international commercial disputes is commercial arbitration. It is not

a new method. Centuries ago traders discovered that commercial arbitration would enable them to
adjudicate their differences quickly, cheaply, privately and fairly. International commercial arbitration
is not a perfect method. It has its disadvantages as well as its outstanding advantages. Unfortunately,
too few of those engaged in foreign trade, aside from large companies or active dealers in staple raw
materials, know in sufficient detail for their own profitable use what international commercial
arbitration is, how it works and what it does.

In international trade and commerce, arbitration has become exceptionally strong and widely
accepted as a means of resolving disputes. Exactly how widely accepted is probably impossible to
know, but some commentators have suggested that a figure as high as 90% of all international
contracts are governed by an arbitration clause.

Rapid globalisation has meant a corresponding growth in the volume of international contracts with
clauses providing for international arbitration. In turn, the availability and effectiveness of
international arbitration has been seen by many as a spur to crossborder commerce and investment.

As the focus of the world economy has tilted towards the higher growth economies in emerging
markets, the disputes brought to international arbitration are increasingly drawn from trade with and
between emerging economies. Although the traditional centres of international arbitration in Western
Europe and North America are busier than ever, they are facing strengthening competition from
elsewhere.

In particular, an increasing number of countries have modernised their arbitration laws and supporting
judicial practices, and an everwidening choice of arbitral institutions worldwide now offer their
services to potential customers. Meanwhile in some jurisdictions the courts themselves are fighting
back and making attempts to attract international disputes away from arbitration.

This exciting but increasingly complicated legal landscape presents an array of choice to international
parties as to how they manage and resolve their disputes. Business needs will always vary depending
on the context, but some general guidance can be drawn from an analysis of those aspects of
international arbitration which have typically been seen as most advantageous for international parties
while minimising perceived disadvantages of international arbitration.