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Neutrality and Enforceability of Arbitration Awards
The ability to resolve disputes in a neutral forum and the
enforceability of binding decisions are often cited as the main advantages of
international arbitration over the resolution of disputes in domestic courts.
And there is solid legal support for this view. The principal instrument
governing the enforcement of commercial international arbitration agreements
and awards is the United Nations Convention on Recognition and Enforcement of
Foreign Arbitral Awards of 1958 (the "New York Convention").[9]
The New York Convention was drafted under the auspices of the United Nations
and has been ratified by more than 140 countries, including most major
countries involved in significant international trade and economic
transactions.[10]
The New York Convention requires that the states that have ratified it to
recognize and enforce international arbitration agreements and foreign arbitral
awards issued in other contracting states, subject to certain limited
exceptions.[11]
These provisions of the New York Convention, together with the large number of
contracting states, has created an international legal regime that
significantly favors the enforcement of international arbitration agreements
and awards.[12]
As a practical matter, what that means is that an
international award originating in a country that is a party to the New York
Convention may be enforced in any other country that is also a signatory, as if
that award were actually rendered by the domestic courts of that second
country. Here is an example of this important concept: assume that parties from
countries A and B have agreed to resolve their disputes in country C, and all
three countries are parties to the New York Convention. This will mean that
even though the arbitration will take place in country C, the resulting award
can be enforced in countries A or B, as if it were a court decision rendered in
the domestic courts of that country. (By contrast, there is no equivalent
treaty for the international recognition of court decisions, although a draft
treaty, Hague Convention of 30 June 2005 on Choice of Court Agreements, was
initiated in 2005.)
Thus, parties to international contracts can decide to site
their disputes in a third, neutral country, knowing that the eventual award can
be easily enforced in any country that is a signatory to the New York
Convention, which has been ratified by a significant majority of commercial
nations (with notable exceptions like Iraq, which, not having ratified the New
York Convention, cannot be assumed to give effect to arbitration decisions
rendered in other countries). An international award therefore has
substantially greater executory (legal) force than a domestic court decision.
Under the New York Convention, if a party to arbitration
commences legal proceedings in breach of an arbitration agreement against
another contracting party, the court is obligated to stay the proceedings.
Chapter 2 of the Federal Arbitration Act sets forth the statutory basis for an American court to
issue a stay in connection with contracts falling within the ambit of the New
York Convention.[13]
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International Commercial Arbitration
The resolution of disputes under international commercial
contracts is widely conducted under the auspices of several major international
institutions and rule making bodies. The most significant are the International Chamber of Commerce
(ICC), JAMS International, the International Centre for Dispute Resolution (ICDR), the international branch of the American Arbitration Association),
the London Court of International Arbitration (LCIA), the Hong Kong International Arbitration Centre, and the Singapore International Arbitration Centre (SIAC). Specialist ADR bodies also exist, such as the World
Intellectual Property Organisation (WIPO), which has an arbitration and
mediation center and a panel of international neutrals specialising in
intellectual property and technology related disputes. See http://www.wipo.int/amc/en/.
A number of arbitral institutions have adopted the UNCITRAL
Rules for use in international cases.
The most salient feature of the rules of the ICC is its use
of the "terms of reference." The “terms of reference” is a summary of
the claims and issues in dispute and the particulars of the procedure, and it
is prepared by the tribunal and signed by the parties near the beginning of the
proceedings.[14]
In a more recent development, the Swiss Chambers of
Commerce of Industry of Basel, Berne, Geneva, Lausanne, Lugano, Neuchâtel and
Zurich have adopted a new set of Swiss Rules of Commercial Mediation that are
designed to integrate fully with the Swiss Rules of International Arbitration
that were previously adopted by these chambers to harmonize international arbitration
and mediation proceedings across Switzerland. For a recent paper on these two
sets of ADR rules and how they may be combined, see http://www.altenburger.ch/uploads/tx_altenburger/jl_2008_Swiss_Rules_Commercial_Mediation.pdf