Understanding the Arbitration Process
Arbitration at the international level has attained growing popularity as a means of settling disputes that involve commercial matters and that cross national borders. This is obviously of some interest to our multinational corporations. They need, for understandable reasons, to have a clear and solid grasp of the way in which the international arbitration process works.
Definition and Key Advantages
The private dispute resolution system of international arbitration offers a comparable alternative to national court systems for the adjudication of international disputes by providing a process in which parties from differing legal and cultural backgrounds can agree to submit their dispute to one or more impartial decision-makers. Some key advantages include:
- Choosing Neutrality: Parties select a neutral forum and arbitrators, thus avoiding the bias of national courts.
- Confidentiality: Most of the time, the actions and the choices made during the proceedings remain private.
- Flexibility: The parties have significant control over both the process and the procedures.
- Legally binding: Internationally, under the New York Convention, arbitral awards are largely enforceable.
The Arbitration Agreement
Any arbitration is built on the foundation of an arbitration agreement between the parties involved. Such an agreement is most commonly found as a clause in the major commercial contract. Here are key elements to include:
- Disputes encompassed
- Choosing Arbitrators: Methods and Number of Arbitrators
- When establishing an arbitration, it is essential to determine the number of arbitrators and the method for selecting them. In general, a party in arbitration might prefer one arbitrator, while the other side might prefer three. The reason is simple: the more arbitrators there are, the more collective decision-making the arbitrators must do to reach a unanimous award. And collective decision-making, as every student of political science knows, is not a happy prospect. Indeed, the prospect of a divided nonsensical award should make any would-be arbitrators blessed with even a modicum of common sense ruled by a 2-1 or 1-2 majority nervous.
- Arbitral tribunal location
- The language in which proceedings are conducted.
- Procedural rules that apply (e.g. ICC, LCIA, UNCITRAL)
- Substantive law governs.
- An arbitration clause that is well drafted is crucial. It sets the parameters for any future dispute.
The Arbitration Journey
The most common phases of an international arbitration are:
- Notice of Arbitration: Claimant submits notice to the respondent.
- The respondent replies to the notice.
- Appointment of Tribunal: The parties select arbitrator(s).
- Hearing in procedure: Tribunal stipulates procedural rules and timeline.
- Submissions in Writing: Detailed assertions, explanations, and evidence of parties to the dispute
- Producing Documents: Little sharing of important documents
- Statements from witnesses: Written testimonies presented
- Listening: Spoken legal reasoning and questioning of witnesses.
- Written submissions that take the format of a brief and are made after a hearing has been concluded.
- Decision made by the Tribunal regarding the award.
This undertaking usually consumes 12 to 18 months, albeit convoluted matters can stretch out to a longer time frame.
Read Also: Legal Essentials of International Employment Contracts
Key Takeaways for Corporations
With the rising significance of international arbitration, corporations should take the following into account:
- The Growing Importance of International Arbitration: Growing application in international trade agreements; Many industries prefer resolving disputes through this method; Unceasing development of arbitral norms and procedures.
- Factors to Consider When Choosing Arbitration: Benefits, Possible Negatives, Expenses, and Flexibility.
- Restricted Information Retrieval: Information that is kept secret or private; Absence of previous examples that may affect enforceability; Restricted opportunities to appeal.
A corporation that takes a strategic approach to international arbitration manages cross-border disputes effectively, minimizing risk and cost to the corporation.