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. Arbitration provides autonomy for parties to tailor the dispute resolution process for their mutual benefit. Parties may select the forum, tribunal, language, and procedure governing the arbitration.
What is international arbitration?
Arbitration is an alternative dispute resolution method (ADR) which is used to create settlements between two opposing parties. In an arbitration, the parties choose to come to an agreement rather than filing a lawsuit and going to trial. The primary benefit of international arbitration is that it is enforceable, where litigation (court cases) between business entities in different countries may not be. Unlike courts, arbitral tribunals in commercial disputes have no inherent power or jurisdiction. It also is set up with the consent of both parties, and results are kept private in most cases. Other benefits are similar to arbitration in the U.S.: it is a faster and less expensive process than litigation. However, depending on where you decide to hold the arbitration, your arbitration may be governed by a different association. Some examples of different international arbitration associations include:
1. The United Nations Commission on International Trade Law (UNCITRAL)
2. The World Bank’s International Centre for Settlement of Investment Disputes (ICSID)
Their authority arises from the parties’ contract (albeit that, once selected by the parties, arbitration has the backing of statutes and treaties). Therefore, parties should take particular care in drafting arbitration provisions. Once a dispute has arisen, self-interest will often mean that it is too late to reach further agreement on how a dispute should be resolved.
Who runs international arbitrations?
There are a number of well-established organizations that administer international arbitrations, and each has its own set of rules. Some well-known institutions include-
>> The International Chamber of Commerce (ICC)
>> The London Court of International Arbitration (LCIA)
>> The Singapore International Arbitration Centre (SIAC)
There are two types of arbitration, ad hoc and institutional–
Ad hoc arbitration: In ad hoc arbitration, parties organize and plan their own arbitration, including the selection of arbitrators, designation of rules and applicable law, and arbritators’ powers. The arbitration agreement must specify all aspects of the arbitration.
Institutional arbitration: When parties select institutional arbitration, an arbitral institution provides the rules of procedure for the arbitration and performs supervisory and administrative functions such as keeping the proceedings on a timetable.
Arbitration provides a binding solution to the dispute by way of an arbitral ‘award’. The award can be enforced internationally through the provisions of the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards, which more than 140 states have ratified. Some 70 jurisdictions, located in all parts of the world, have adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, often with no or only small amendments. Currently therefore, the practice of the courts is often a more important consideration for parties if the Model Law has been already adopted.