International arbitration is a method of dispute resolution where the parties are entitled to appoint a tribunal of arbitrators who will resolve their dispute. It is generally recognized as the preferred dispute resolution mechanism in cross-border disputes. Before starting arbitration proceedings, the disputing parties must agree to submit their dispute to arbitration. Such an agreement is usually found either in the form of a dispute resolution clause in a commercial contract or as an agreement to arbitrate a dispute that has already arisen.
In their arbitration agreement, the parties may agree on a number of key aspects of the arbitral process, including the seat (i.e., legal place) and language of arbitration, number of arbitrators, process for nominating arbitrators, governing law of the arbitration agreement (which need not be the law governing the contract in dispute), arbitral rules, and an arbitral institution to administer the arbitration.
International arbitrations are typically conducted before one or three arbitrator(s). The sole arbitrator or tribunal is the equivalent of a judge in civil court proceedings. However, the most important difference is that the arbitrators are generally selected by the parties or by an arbitral institution, thus enabling the parties to choose who will determine their dispute.
The arbitration process concludes with the tribunal issuing an award, similar to a court judgment. The award is final and binding on the parties – and can only be set aside on exceptional grounds.
Key features of international arbitration
As a private and mutually agreed-upon form of dispute resolution, international arbitration is less formal than judicial proceedings and allows the parties a degree of flexibility and autonomy to agree on crucial matters, such as the place of arbitration, arbitral rules and governing law.
One of the key advantages of international arbitration over litigation is the ease with which arbitral awards can be enforced. An arbitral award is generally enforceable pursuant to a multilateral treaty, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (also known as the New York Convention), which has been ratified by 155+ countries. Under the New York Convention, non-domestic arbitral awards are enforced and recognized in any of the ratifying states subject to certain narrow exceptions.
International arbitration provides a neutral forum for the resolution of cross-border disputes. This is particularly important when a party wishes to avoid certain foreign jurisdictions where the domestic judicial system of one party may prove complex and challenging to navigate.
Filing of pleadings and rulings issued by an international arbitral tribunal are generally not available to the public and are communicated only to the parties involved. Further, most international arbitration institutional rules require confidentiality to be maintained by the parties and the arbitrators.
Choice of arbitrators
International disputes often involve specialized legal or technical issues, including construction law, intellectual property (in many jurisdictions), etc. If parties choose to resolve their disputes using international arbitration, they are often free to appoint arbitrators with the requisite qualifications and expertise that will be most beneficial to the outcome of the case.
Binding/finality of award
Most domestic arbitration laws of the most popular seats of arbitration (London, Paris, Singapore, New York.) do not allow for the award to be challenged except in very limited circumstances. This helps reduce costs by minimizing the chance of appeal proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.