Like domestic arbitration, international arbitration is a private form of binding dispute resolution before a neutral decision maker or tribunal predicated on party agreement. In light of the globalization of commerce, trade, and investment, arbitration of international financial disputes should be considered as a beneficial alternative to litigation in resolving cross-border and international commercial disputes.
Advantages and Disadvantages of International Arbitration
One of the most significant advantages of using arbitration to resolve an international commercial dispute is the greater ease for parties to enforce the award. Arbitral conventions enable this process. The most noteworthy such convention is the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention and codified in the United States at 9 U.S.C.S. §§ 201 et seq. (known as the Convention Act)). The New York Convention requires the courts of the signatory nations to enforce arbitral awards rendered in other signatory nations, subject to limited grounds of refusal. Over 150 countries, or about three-quarters of countries recognized by the United Nations, are parties to it. No similar convention exists for the enforcement of foreign judicial judgments.
The Convention Act in the United States establishes a strong presumption in favor of the arbitration of international commercial disputes. See, e.g., Escobar v. Celebration Cruise Operator, Inc., 805 F.3d 1279, 1285 (11th Cir. 2015), cert. denied, 136 S. Ct. 1158 (2016); Ministry of Def. & Support v. Cubic Def. Sys., 665 F.3d 1091, 1095 (9th Cir. 2011). Thus, whether a dispute crosses the United States border or spans multiple countries across the globe, enforcing an arbitration award is generally much easier than with litigation.
Other advantages of international arbitration derive from the nature of arbitration itself. As an initial matter, parties may select or have substantial input into the arbitrator or panel who will decide their dispute. This is especially beneficial for cases involving technical or industryspecific issues. Parties may select an arbitrator with particular knowledge and experience that bear on their dispute. This contrasts with litigation, in which judges are randomly assigned. As a result, parties in litigation may find that the presiding judge, though sophisticated and conscientious, lacks familiarity with the specific, perhaps highly technical, issues involved. In contrast, with an arbitrator already deeply versed in the matters at hand, parties and their counsel may feel less of a need to "educate" the arbitrator and feel less concern about a potential adverse result.
As in domestic arbitration, parties also have greater control over the arbitration process than the litigation process, which allows for more flexibility. Parties may therefore streamline proceedings to suit their needs or the nature of their dispute. For example, they may agree to limit or disregard aspects of discovery, motion practice, or the merits hearing itself (such as oral testimony). See Indus. Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 141 F.3d 1434, 1444 (11th Cir. 1998) (observing that arbitration rules "allow arbitrators to resolve disputes without the many procedural requirements of litigation"); Bergesen v. Joseph Muller Corp., 710 F.2d 928, 929 (2d Cir. 1983) (commenting that "[i]nternational merchants often prefer arbitration over litigation because it is faster, less expensive and more flexible" than litigation); Al Maya Trading Establishment v. Glob. Exp. Mktg. Co., No. 16-CF-2140 (RA) (S.D.N.Y. Mar. 17, 2017) (commenting that parties can choose limited or, conversely, more expansive discovery, while arbitrators are authorized to conduct proceedings in the manner they deem most appropriate). Arbitration tribunals typically offer "fast-track" or "expedited" procedures. These procedures are extremely helpful for resolving disputes with discrete issues.
Arbitration offers other valuable advantages that parties often desire. It provides greater confidentiality, which may be of obvious importance to your client. Although parties to a litigation may certainly enter into confidentiality agreements, litigation is still public by its nature. Court filings, unless sealed, are publicly available. The impartial nature of the arbitral institution is another benefit. This eliminates the concern of having a dispute adjudicated by a court in another country that may favor perceived interests of the forum country. Even if it is ultimately not the case, the concern itself of such a possibility should not be minimized, especially when your client is involved in an extremely high-dollar-value or "bet the company" dispute.
Other aspects of arbitration may be advantages or disadvantages, depending on the nature of the dispute at issue and a party's needs. For example, arbitration generally involves narrower discovery. Yet, a party may seek broader discovery coincident with that available in litigation, given the complexity and scope of the issues involved. Parties must be mindful, however, that, while they may seek broader discovery, the ultimate scope of discovery in the arbitration may nonetheless still be constrained, either by other parties' resistance or by the arbitrator's goal of efficient management of the proceedings in accord with the overall nature and purposes of arbitration .
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.