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International arbitration-Part 01

  6/26/2012
Summary:International arbitration-Part 01

International arbitration is a leading method for resolving disputes arising from international commercial agreements and other international relationships. As with arbitration generally, international arbitration is a creature of contract, i.e., the parties' decision to submit disputes to binding resolution by one or more arbitrators selected by or on behalf of the parties and applying adjudicatory procedures, usually by including a provision for the arbitration of future disputes in their contract.[1] The practice of international arbitration has developed so as to allow parties from different legal and cultural backgrounds to resolve their disputes, generally without the formalities of their respective legal systems.

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[edit] Main Features of International Arbitration

International arbitration has enjoyed growing popularity with business and other users over the past 50 years. There are a number of reasons that parties elect to have their international disputes resolved through arbitration. These include the desire to avoid the uncertainties and local practices associated with litigation in national courts, the desire to obtain a quicker, more efficient decision, the relative enforceability of arbitration agreements and arbitral awards (as contrasted with forum selection clauses and national court judgments), the commercial expertise of arbitrators, the parties' freedom to select and design the arbitral procedures, confidentiality and other benefits.

International arbitration is sometimes described as a hybrid form of dispute resolution, which permits parties broad flexibility in designing arbitral procedures. As one example, consider the International Bar Association (IBA)'s Rules on the Taking of Evidence in International Commercial Arbitration, revised in 2010.[2] These rules adopt neither the common law jurisdictions' broad disclosure procedures (Discovery), nor follow fully the civil law in eliminating entirely the ability to engage in some disclosure-related practices. The IBA Rules blend common and civil systems so that parties may narrowly tailor disclosure to the agreement's particular subject matter.

David Rivkin,[3] who chaired the committee that drafted the rules, has noted that the wide adoption of these rules in international arbitration has led in practice to an unexpected use by common law practitioners to limit disclosure and by civil law practitioners to expand it. With a possibly more intuitive cause and practical effect, arbitral tribunals will often read party election of the IBA Rules as an election most akin to US-style Discovery. This is hardly surprising given the Rules' language and the IBA's close ties through the years to the American Bar Association (ABA).

Rules of evidence represents just one example of the different practice that applies to international arbitration, and which distinguishes it from provincial forms of arbitration rooted in the procedures of a particular legal system. There are a variety of approaches to international arbitration at the national level, even where model laws have been adopted.[4] These approaches can be further impacted by arbitral rules that may be agreed between the parties. Similarly, international arbitral practice has given rise to its own non-country-specific standards of ethical conduct which are believed to apply in international proceedings and, more to the point, to the arbitrators who are appointed to conduct them.[5]

[edit] Differences with Domestic Arbitration and Mediation

International arbitration is a significant variant of the practice in many countries of arbitration, from which it is derived and shares many features. It is not just the fact that international arbitration arises in the context of international contracts that makes it different. In the international dispute resolution community, it is widely accepted to be a different animal entirely, involving different practices and rules, and being represented by a different community of arbitrators and legal practitioners.[6]

It is essential to draw a firm distinction between Arbitration and Mediation or Conciliation, which are both sometimes characterized as forms of ADR (Alternative Dispute Resolution). In countries where mediation is new or struggling to be introduced as a concept, this association has given rise to the misleading impression that mediation is a form of non-binding arbitration, with the arbitrator proposing or suggesting outcomes based on an assessment of the parties' rights. In fact, arbitration and mediation or conciliation are fundamentally different: the former is a binding determination of legal rights, the latter two forms of dispute resolution involve facilitated negotiation which aims at producing a consensual settlement.[7] The one leads to a binding determination (arbitration), the other only in the event the parties agree to settle their dispute on mutually satisfactory terms (mediation).

[edit] The Advantages of International Arbitration

For international commercial transactions, parties may face many different choices when it comes to including a mechanism for resolving disputes arising under their contract. If they are silent, they will be subject to the courts of wherever a disaffected party decides to initiate legal proceedings and believes it can obtain jurisdiction over the other party. This may not sit well with parties that need to know at the time of entering into their contract that their contractual rights will be enforced. The alternative to silence is to specify a method of binding dispute resolution, which can be either litigation before the domestic tribunal of one of the parties or arbitration. If the parties choose to resolve their disputes in the courts, however, they may encounter difficulties.

The first is that they may be confined to choosing one or the others' courts, as the courts of a third country may decline the invitation to devote their resources to deciding a dispute that does not involve any of that country's citizens, companies, or national interests. An exception to that rule is New York State, which will not entertain a forum non conveniens motion when the dispute concerns a contract that is worth one million dollars or more and in which the parties included a choice-of-law clause calling for application of New York law.[8] The second, and perhaps more significant difficulty, is that judicial decisions are not very "portable" in that it is difficult and sometimes impossible to enforce a court decision in a country other than the one in which it was rendered.


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