International Arbitration

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.

Main Features of International Arbitration

As the world grows smaller – the result of the ability to travel greater distances in a shorter time and in conjunction with vastly growing communications capabilities, world trade has become the norm for a exponentially growing economy without borders. And with ever growing international trade – come disputes.

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 of 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.

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 or arbitrators and legal practitioners. [3]

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 difficulty 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 [4]. 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.

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 (http://www.jamsinternational.com/) , 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 specializing 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 recent salient feature of the rules of the ICC is its use of the “terms of reference”. The “terms 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. [5]

In a more recent development, the Swiss Chamber of Commerce of Industry of Basel, Berne, Geneva, Lausanne, Lugano, Neuchatel 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/alternburger.ch/uploads/tx_altenburger/jl_2008_Swiss_Rules_Commercial_Mediation.pdf

Drafting International Arbitration Clauses

A number of essential elements should be included in almost all international arbitration agreements. These include the agreement to arbitrate, a definition of the scope of disputes subject to arbitration, means for selecting the arbitrator(s), a choice of the arbitral seat and the adoption of institutional or ad hoc arbitration rules [6]. A number of other provisions can also be included in international arbitration clauses, including the language for the conduct of the arbitration, choice of applicable law, arbitrator qualifications, interim relief, costs, procedural matters and the like.

International Arbitration Institute (IAI)

The International Arbitration Institute, headed by Emmanuel Gaillard, was created in 2001 under the auspices of the Comité François de l’Arbitrage (CFA) to promote exchanges and transparency in the international commercial arbitration community.

The Association for International Arbitration (AIA)

The association for International Arbitration is a non-profit organization, founded in Paris in 2001 by Johan Billiet. The Association for International Arbitration has n increasing number of members among arbitrators and mediators of international backgrounds.

The Association was established with the aim of facilitating arbitration, mediation and general forms of dispute resolution internationally. Today, the AIA has developed into an organization dealing in the private international law field to meet the needs of the fast-growing evolution of dispute resolution within the international community. AIA provides information, training and educational activities to expand the promotion of arbitration and ADR globally by means of securing partnerships with various organizations and parties to get involved in the life of the association. The association constantly works to develop partnerships in the international realm and to provide the international community of arbitrators and ADR professionals with continuous exposure to the latest international developments, activities and opportunities in the field. AIA continually encourages the participation and contribution of its members in the pursuit of the association’s goals.

  1. Gary B. Born, International Commercial Arbitration, 187,197,217 (2009); Julian M. Lew, Loukas A. Mistelis & Stefan M. Kroll, Comparative International Commercial Arbitration 1-10 to 1-11, 6-1 to 6-6 (2003)
  2. (http://www.ibanet.org/images/downloads/IBA%20ruls%20on%20the%20taking%20of%20Evidence.pdf)
  3. Yves Dezalay & Bryant G. Garth, Dealing in Virtue: International Commercial Arbitration And the Construction of a Transnational Legal Order 9-10, 124, 198 (1996)
  4. NY GOL 14-502
  5. http://www.alway-associates.co.uk/legal-update/article.asp?id=72
  6. G. Born, International Arbitration And Forum Selection Agreements: Drafting and Enforcing 38 (3d ed. 2010); Paul D. Friedland, Clauses For International Contracts 61-69 (2nd ed. 2007)