Arbitration is a method of resolving disputes by a binding and enforceable decision.
Arbitration requires consent. You may agree with your business partner to have your dispute decided by one or more arbitrators instead of taking your dispute to a national state court.
There are different types of arbitration. They range from large, formal proceedings between states over a disputed boundary to short, informal procedures about the quality of goods under the rules of a trade association. The procedure and the reasons for choosing it depend on the type of dispute concerned. What all arbitrations have in common is that the parties must agree to the process and that they result in a binding and enforceable decision.
The principal advantage of international arbitration is that the award (i.e. the arbitral ‘judgment’) is usually more readily enforceable in more states of the world than a judgment of a national court. The reason for this is a treaty called the New York Convention (see separate sub-menu item). International Arbitration can also have other advantages.
The parties to an international arbitration have much freedom to decide its procedure. This can have a great effect on the arbitration’s cost and how long it takes.
An international commercial arbitration is usually supervised by a national legal system. This is called the ‘seat’ of the arbitration. The parties are free to choose the seat. The courts of the seat have limited power to intervene in order to enforce minimum standards of due process and to support the arbitration (e.g. by appointing an arbitrator or ordering interim relief).
Another advantage of international arbitration is its flexibility. In particular, the parties can decide whether they want a physical hearing and whether this should take place at the seat or anywhere else in the world.
Another basic choice is whether to place your arbitration within the framework of an Arbitral Institution. The choice of an institution will incorporate a specific set of procedural rules, including provisions regarding the appointment of the tribunal and their costs.
An arbitration award is usually final (i.e. it cannot be appealed on the merits) and enforceable in many states with little formality.